Dive Brief:
- Advocate Health Care reported revenues of $1.52 billion for the fiscal year 2017 second quarter that ended June 30, up 7.6% from $1.42 billion a year ago. At the same time, operating income fell 41.8% to $47.4 million, compared with $81.5 million in Q2 2016.
- According to unaudited financial documents, the downturn was due in part to consolidation of Advocate Physician Partners, the nonprofit health systems’ physician group, into the corporate financial statement. The system also cited rising employee wage costs as a reason for the decline.
- Net income dropped 28.4% to $170.9 million, against a 10.6% increase in total expenses to $1.48 billion.
Dive Insight:
In May, Advocate announced a $200 million cost-cutting plan aimed at firming up its future. The Downers Grove, Ill.-based nonprofit health system has been strained by financial pressures, including an increased in uncompensated care. Thursday's news follows a hiring freeze and a halt to merger plans with Northshore University HealthSystem.
The 12-hospital system also recently agreed to pay HHS’ Office for Civil Rights $5.55 million to settle potential violations related to electronic personal health data — the largest settlement to date against a single organization.
The settlement, disclosed early last month, stemmed from three breaches involving Advocate Medical Group, a subsidiary. A review of the breaches, which affected about 14 million patients, revealed serious gaps in Advocate’s procedures for securing personal information in its databases.
Rising expenses and declining revenues and admissions have made for hard times for hospital systems generally. The aborted Advocate-Northshore merger would have resulted in Illinois’ largest nonprofit health system with 16 hospitals, 4,000 beds and 45,000 employees aiding 3 million patients a year. That could have improved the Advocate’s negotiating leverage with insurers, helping to reduce operating expenses and improve financial security.