Even as it held a steady operating margin, Baylor Scott & White's profit took a hit in the first six months of its fiscal 2019 on weak investment returns.
The Dallas-based not-for-profit health system reported Thursday it generated an excess of revenue over expenses of $267.7 million in the six months ended Dec. 31, 2018—the first half of its fiscal 2019—down 55% over the prior-year period, when it was $595.5 million. Meanwhile, the system's operating margin ticked up slightly to 8.5% in the latter half of 2018, from 8% in the 2017 period.
Like other systems, Baylor Scott & White took a hit on weak investment returns. The system recorded $186.8 million in unrestricted unrealized losses on investments in the six months ended Dec. 31, 2018, compared with gains on investments of $111.8 in the prior-year period. Within that period, unrestricted investment income dropped 11.6%.
Similarly, not-for-profit Kaiser Permanente reported last week that its non-operating income plummeted by 71% in its fiscal 2018 year-over-year. The Oakland system's treasurer blamed market volatility.
Baylor Scott & White made the surprising announcement Feb. 5 that it was calling off its proposed merger with Houston-based Memorial Hermann Health System five months after the two signed a letter of intent. The systems did not share many details on why the deal fell through.
The system's revenue grew to $4.9 billion in the six months ended Dec. 31, 2018, compared with $4.8 billion in the prior-year period. Income from operations was up 8.4% in that time, growing from $383.4 million in the latter half of 2017 to $415.8 million in the 2018 period.
The system's utilization results were mixed, showing declines on the acute side and slightly smaller gains on the outpatient side.
Baylor Scott & White's inpatient admissions dropped 7.4% in the six months ended Dec. 31, 2018, to about 5,100. Patient days declined 5.1% in that time to about 520,000. Discharges declined 7.4%, while emergency room visits declined 7.7%. Inpatient surgeries dropped 5.7% in the six-month period year-over-year, while outpatient surgeries grew 6.4% in that time. Meanwhile, patient encounters grew 5.2%, and outpatient registrations were up 5.8%.
Baylor Scott & White's adjusted earnings before interest, taxes, depreciation and amortization grew slightly in the 2018 period to $731.3 million, compared with $730.5 million in the 2017 period.
The system's net patient care revenue grew 3.8% in the six months ended Dec. 31, 2018, to $4.3 billion. Meanwhile, premium revenue declined 3.6% to $397.6 million.
Baylor Scott & White's expenses grew 1.4% in the six months ended Dec. 31, 2018, over the prior-year period to $4.5 billion. Within that, the cost of medical claims declined 2.9%, which the system said was because of reductions in its fully insured group and individual membership.