Ascension revenue dips amid restructuring, shift in focus
- St. Louis-based Ascension Health, the largest Catholic health system in the country, reported year-over-year drops in operating income ($282 million from $749 million) and revenue ($17.09 billion from $17.15 billion) for the first nine months of fiscal year 2018 as it looks to shift away from a business focused on hospitals.
- Total admissions for the health system declined 3.1%, while visits to physician offices and clinics rose 3.8%. Ascension attributes its losses in volume and operating revenue to the divestitures of Saint Joseph Hospital and Door County Hospital.
- Ascension is in the midst of major restructuring that has included hospital divestitures, leadership cuts and investments in ancillary businesses and outpatient partnerships. The restructuring is expected to save the organization $400 million in fiscal year 2018 and potentially $61 million in fiscal year 2019.
Earlier this year, Ascension CEO Anthony Tersigni told employees that the health system will begin to focus on outpatient facilities and telemedicine as it moves away from its hospital and inpatient facilities. Additionally, the 151-hospital system made some changes to its organizational structure, including business travel limitations, virtual meetings and leadership pay cuts.
The company also recently laid off 500 workers in Michigan, and more could be on the way.
The hospital operator reported a 93% drop in operating income for the first three months of fiscal year 2018. The first six months of FY2018 saw total operating revenue drop by $122.1 million, in comparison to the same time period in the previous year.
Ascension is ramping up its ancillary businesses, investing in supply chain, drug manufacturing and technology management, among other ventures. Through its ancillary businesses, the Catholic health system was able to reel in $150 million in additional revenue last year. A recent report from Moody's Investors Services backs up this strategy, saying nonprofit systems will need to focus on flexibility and liquidity to stay viable in the coming years.
Most recently, Ascension partnered with Ramsay Health Care on a new supply chain venture. Ascension EVP John Doyle said in a statement the company is hoping to form "more productive relationships with the vendor community."
Ascension and Presence Health signed a definitive agreement earlier this year for Presence to join Ascension and become part of AMITA Health, a joint venture between Ascension’s Alexian Brothers Health System and Adventist Midwest Health.
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