- Illinois- and Wisconsin-based health system Advocate Aurora Health continues to struggle with operating expenses but may be over the worst since its 2018 merger, reporting a year-over-year revenue increase of 6.5% to $3.2 billion in its second quarter results.
- Operating income before nonrecurring expenses was $183 million in the quarter, up over 50% from same quarter last year. However, nonrecurring expenses jumped over 250% year-over-year to $51 million in the quarter, a hike the system chalked up to costs related to the merger, EHR implementation and an early retirement incentive program formed to reduce operating expenses.
- The not-for-profit system's capitated revenue, aka revenue from value-based payment arrangements, dropped by $25 million year-over-year in the quarter due to one of the contracts being converted to a fee-for-service arrangement. Patient service revenue increased almost 9% in the quarter to $2.68 billion, primarily due to increased outpatient volume, April's acquisition of the Bay Area Medical Center and revenue bump from the conversion of the capitated contract.
The nonprofit health system, based out of Downers Grove, Illinois, and Milwaukee, merged in April 2018 to form the nation's 9th largest hospital chain with more than 500 outpatient facilities and 28 hospitals.
Advocate Aurora took a major hit in operating income in the first half of last year, mostly due to the residual effects of the merger and implementing a new EHR. The system pivoted its focus to more lucrative outpatient visits in an attempt to recoup volume, a strategy that seems to be paying off with the increase in patient revenue.
Outpatient visits increased almost 12% year-over-year to 1.29 million.
The system raised some eyebrows when it announced both Advocate's CEO and Aurora's CEO would be serving as co-chief execs. However, that unique arrangement fell through in late July with the announcement that Jim Skogsbergh, formerly of Advocate, would become sole president and CEO, shunting Aurora's Nick Turkal aside to "pursue other interests," according to a press release.
It's unclear how the departure will affect salaries, as it happened outside of the quarter ended June 30. In 2017, Skogsbergh and Turkal had combined pay of $23 million.
Salaries, wages and benefits increased almost 8% year-over-year in the quarter due to continued increases in staffing to $1.74 billion.
The system announced late last year it would be increasing the minimum wage to $15 an hour by early 2021. Advocate Aurora plans to make the increases incrementally, reaching $13 an hour in the middle of this year and $14 in 2020. It's on track and that's reflected in the July paychecks, a system representative told Healthcare Dive.
In the first half of the year, Advocate Aurora had $346 million of construction in progress, including $250 million to build a medical center in Mount Pleasant, Wisconsin, with a completion date sometime in 2021. Additionally, the system is building a medical campus for approximately $325 million for completion in 2022, and an ambulatory surgery center for approximately $130 million for completion in 2020, both in Wisconsin.
The health system, a member of the Health Care Climate Council, also intends to power all of its healthcare operations with renewable electricity by 2030. The decision was both a social responsibility and cost-saving one, according to Mary Larsen, director of environmental affairs and sustainability at Advocate Aurora.