Partners reports nearly six-fold jump in operating income

Partners HealthCare grew its operating income just under six-fold during its fiscal 2018 compared with the prior year.

The Boston-based not-for-profit health system drew nearly $310 million in operating income during its fiscal 2018, which ended Sept. 30, compared with $52.6 million in fiscal 2017. That works out to an operating margin of 2.3% in fiscal 2018 and 0.4% in fiscal 2017. Almost 90% of that came from providing healthcare services, and the remainder from its health plan, AllWays Health Partners.

Partners drew $13.3 billion in total operating revenue in the fiscal year, down slightly from $13.4 billion in fiscal 2017. Partners' total operating expenses during the quarter were just under $13 billion, down from $13.3 billion in fiscal 2017.

Despite a dip in non-operating gains, Partners also managed to grow its excess of revenue over expenses by 25% year-over-year to $826.6 million.

"Our healthcare delivery system and our insurance plan exceeded performance expectations, putting us in a stronger position to serve the healthcare needs of our patients going forward," Peter Markell, Partners' chief financial officer, said in a statement. "While a 2-3% margin is slim compared to our peers across the nation, it enables us to reinvest in patient care and provide for the future capital needs of our hospitals and facilities."

Through the system's Partners 2.0 initiative, it will work to improve the patient experience, empower researchers to discover new treatments and educate the next generation of providers, Markell said.

Partners recorded a $1.4 billion shortfall in fiscal 2018 due to reimbursements from government programs like Medicare and Medicaid that didn't cover the cost of providing care to those patients. The health system said the shortfall was similar to that which it recorded in fiscal 2017.

Of Partners' nearly $517 million fiscal 2018 non-operating gains, $157 million accounts for the impact of Mass Eye & Ear joining Partners on April 1. The rest reflects improved investment performance, philanthropic activity and an increase in the market value of interest rate swaps, the health system said. More than half of the health system's $606.5 million fiscal 2017 non-operating gain reflected the Wentworth-Douglass Health System joining Partners on Jan. 1, 2017.

Inpatient discharges to Partners facilities grew 2.3% year-over-year to 169,000 in fiscal 2018. On a same-facility basis, discharges grew 0.8%. The health system recorded 8% year-over-year growth in ambulatory visits to 1.8 million in fiscal 2018. That metric declined by 0.5% when viewed on a same-store basis, however. Partners reported 5.3% growth in emergency department visits to about 426,000 during that time, or 0.4% growth in ED visits on a same-facility basis.

Partners, which last month called off merger talks with Wellesley, Mass.-based Harvard Pilgrim, is about to get a big new competitor. Massachusetts' attorney general recently approved the creation of Beth Israel Lahey Health, which would be the state's second-largest health system by revenue behind Partners.

Partners, whose hospitals include Brigham and Women's Hospital and Massachusetts General Hospital, is still awaiting regulatory approval to acquire Care New England Health System of Providence, R.I.