Dive Brief:
- Advocate Aurora Health, which is preparing to merge with Atrium Health, reported a net loss of $600 million in the first half of this year — down from a $1.1 billion dollar gain in the prior-year period — as higher wages and supply costs dampened results.
- The Midwest hospital operator had an investment loss of $666 million in H1, resulting in a total net nonoperating loss of $630 million, a reversal from a nonoperating income gain of $864 million in the year-ago period.
- The nonprofit Advocate-Atrium system, when combined, will be among the country's largest, with 67 hospitals across six states. The merger deal, announced in May, is subject to antitrust review but is expected to close before the end of 2022, Advocate said Monday in its financial statement.
Dive Insight:
Nonprofit hospitals are finding it tough going in the first half of the year, up against the double whammy of surging staffing costs and steep investment declines. In a gloomy outlook, Fitch Ratings last week said conditions in the sector are deteriorating, and more expensive labor is likely here to stay for the rest of the year and beyond.
Systems reporting weaker second-quarter operating income have included Mayo Clinic, Intermountain Healthcare, Sutter Health, Kaiser Permanente, Providence and Mass General Brigham.
Advocate Aurora said expenses in the first half of the year totaled $7.04 billion, an increase of 9.1% over the same period a year ago. Nonrecurring expenses totaled $17.7 million related to the proposed merger with Atrium and the implementation of an enterprise resource planning system.
Salaries, wages and benefits climbed 12.3% to $4.16 billion in the six-month period, mainly due to higher nurse agency costs and merit and premium pay for clinical care. Advocate said it also boosted full-time positions by 1.8% to handle higher patient volumes.
The category of expenses including supplies and purchased services rose 4.4% to $2.26 billion in the first half, propelled by growth in patient volumes and higher drug and supply costs resulting from a rise in patient acuity and the inflationary environment.
Patients are returning to Advocate's hospitals, with both outpatient and physician visits up in the first half compared to a year ago, contributing to a 5.5% increase in patient service revenue to $5.94 billion for the six months. Other operating revenue climbed 11% to $566 million, reflecting increased pharmacy revenue.