Henry Ford Health System's latest financial filing show it continues to rely on federal COVID-19 stimulus grants to stay in the black as the system struggles with mounting staff and supply costs.
Without the stimulus funds, the Detroit-based system would have lost $14 million on $5.1 billion in operating revenue in the nine months ended Sept. 30, a 0.3% loss margin. That's a fraction of the $96 million operating loss Henry Ford would have posted on $4.8 billion in revenue in the comparable 2020 period without the federal help, a 2.1% loss margin.
Including the funds, the system posted $6.5 million in operating income in the 2021 period and $264 million in the 2020 period. Henry Ford recorded almost $360 million in relief funding in the 2020 period and $21 million this year.
Even as some not-for-profit systems have been remarkably profitable despite the ongoing pandemic, Henry Ford has had a particularly difficult time weathering the resulting staffing and supply cost spikes. The system recently said it would hire 500 nurses from the Philippines over the next few years to help with its ongoing nursing shortage. In September, Henry Ford took 120 beds offline across its five hospitals because it didn't have enough people to staff them. A spokesperson said at least some of those had reopened, but could not provide an exact number.
Henry Ford's latest release shows salaries, wages and benefits expenses—the largest category by far, comprising 43% of expenses—grew 8% year-over-year. The system said that's because of bringing in temporary staff and raising the minimum wage to $15 per hour.
Henry Ford also spent more on wage program initiatives designed to address the competitive labor market. Robin Damschroder, Henry Ford's chief financial officer, said in a statement that the labor shortage has forced the system to engage in retention, schedule adherence and other premiums to ensure it has adequate staffing in critical roles like nurses, technicians and customer service, environmental services and dietary workers.
Henry Ford's supply expenses increased even more—by 18%—year-over-year. Damschroder said 2021's uptick in COVID cases was the biggest contributor, including the continued need for pandemic-related supplies. The return of elective surgeries also played a role. One thing that wasn't a big factor: the global supply chain disruptions that are causing price hikes elsewhere. Henry Ford said that hasn't been a big issue for the system yet, but it's bracing for higher prices, shortages and delays in the near future.
Another expense that grew dramatically in the 2021 period was the amount Henry Ford's health plan paid for members' care. That line item shot up almost 15% in the 2021 period. Henry Ford said pent-up demand for outpatient and professional services accounted for more than half of the increase. The rest was costs associated with Medicare Advantage and Medicaid membership and those related to treatment, testing and vaccines for COVID-19. To the last point, Damschroder said the health plan has spent $100 million year-to-date on COVID treatment and testing.
Henry Ford's revenue grew at less than half the rate of expenses in the nine months ended Sept. 30, just 4.7% year-over-year. Within that, net patient service revenue increased 18.5% due to volume increases that reflect the recovery from 2020's pandemic-induced volume declines. Outpatient surgeries grew 29.4% year-over-year, and inpatient surgeries grew 10%. Emergency room visits were up 7% in the 2021 period, and discharges were up 4.2%. Meanwhile, virtual visits declined almost 18%.
"New mutations of the virus and low consumer confidence levels may continue to impact the System's revenue throughout the balance of 2021," Henry Ford wrote in its financial release.