Dive Brief:
- Advocate Aurora Health's operating income for 2021 climbed to $593.6 million, more than double the $213 million from the year before, as the nonprofit recovered from the negative effects of the COVID-19 pandemic, including delayed elective procedures. Its operating margin improved to 4.2% in the year ended Dec. 31, from 1.6% in the prior year.
- However, the Midwest hospital system posted weaker fourth-quarter operating income, which slumped to $144.7 million from $239.9 million in the same period the year before, hurt by higher expenses for wages and supplies and reductions in Coronavirus Aid, Relief, and Economic Security Act funding and investment income.
- Total revenue for the year rose 7.2% year over year to $14.1 billion, helped by an almost 15% increase in revenue from patient services. The year before, cancellations and postponements of some healthcare services weighed on patient service revenue, the system said.
Dive Insight:
Advocate Aurora, which operates 26 hospitals in Illinois and Wisconsin, fared better than some of its peers last year in operating under the financial pressures brought by the pandemic. A number of nonprofit chains have reported weakened operating results in recent months, including Providence, Ascension, CommonSpirit Health and Baylor Scott & White.
Hospital systems are dealing with a surge in labor and supply costs, while federal pandemic relief funding has tapered off. Advocate Aurora is not immune to those challenges. The organization reported it received $34.4 million in HHS provider relief grants in 2021, compared to $786.7 million received in 2020.
Total expenses last year rose almost 5% to $13.4 billion, compared to a year ago. Salaries, wages and benefit expenses were up 3.2% in 2021, primarily due to an increase in temporary help, Advocate Aurora said. Those costs were partly offset by a 0.6% decrease in full-time equivalent employees.
The system said it implemented additional programs for its employees in its pandemic response after March 2020 that included family care reimbursement and cell phone and remote worker allowances, and those expenses continued last year.
Supplies, purchased services and other expenses increased almost 8%, driven by costs for drugs and additional items needed to care for COVID-19 patients.
However, like other nonprofits, Advocate's nonoperating income — notably, its income from investments — significantly boosted its bottom line in 2021. The system reporting nonoperating income of $1.3 billion in the year, more than triple its nonoperating income in 2020.
That drove Advocate's net income to almost $1.9 billion, also more than triple its bottom line the year prior.
Advocate Aurora said it benefited in 2021 as increased vaccination rates and other mitigation strategies helped contain the virus, which had a "significant negative impact on operations" beginning in March 2020.
The healthcare provider said four big capital projects were ongoing or approved in 2021. The $121.3 million expansion of its ambulatory base at Advocate Illinois Masonic Medical Center in Chicago is expected to be completed in January 2025. In addition, the system is in the final phase of a $348 million effort to privatize all patient rooms at Illinois Masonic. The total project is expected to be finished by September 2029.
Construction of a hospital, medical office and related buildings in Mount Pleasant, Wisconsin, was completed in 2021 at a cost of $225 million and opened for patients in February of this year. In Sheboygan, Wisconsin, Advocate Aurora is building a $325 million medical campus to replace an existing campus, with an expected completion date in July 2022.