Advocate Aurora Health's strong margin turned into an operating loss in the first quarter of 2020 after the health system shut down procedures due to the COVID-19 pandemic.
The Downers Grove, Ill. and Milwaukee-based health system reported a $85.7 million operating loss in the quarter ended March 31—a 2.7% loss margin—compared with $112.8 million in operating income in the prior-year period, a 3.7% operating margin.
Expenses jumped almost 9% to just under $3.2 billion in the quarter ended March 31, 2020 compared to the prior-year period. Within that, salaries and benefits grew 10.1%, partly due to an increase in personnel from the COVID-19 response and increased benefits due to higher claims experience associated with employee health plans. Supply expenses grew 10.2%.
Meanwhile, revenue inched up just 2.6% year-over-year in the quarter, to $3.1 billion. Like other systems, Advocate Aurora said the real hit came in March. March 2020 brought in 10.2% less revenue—about $106 million less—than March 2019.
Advocate Aurora wrote in a note accompanying the results that the health system began postponing or canceling elective procedures on March 17 to comply with public health protocols. The timing and rate of reimbursement for COVID-19 related patient care is unknown, the system said, as is the ability to respond to patient demand.
Advocate Aurora said it's also unclear how long the delay in elective procedures will last, and whether patients will eventually return for those procedures. It's also possible the pandemic will change the health system's payer mix or demand for charity care, the system said.
A sharp drop in investment income brought Advocate Aurora's revenue less than expenses to $1.3 billion in the first quarter of 2020, compared with $597,000 in revenue in excess of expenses in the prior-year period.
Advocate Aurora reported 229 days cash on hand as of March 31, 2020, compared with 274 as of Dec. 31, 2019. The system attributed the decline to investment and operating losses in 2020.