- St. Louis-based hospital operator Ascension reported a 93% drop in operating income in the first quarter of fiscal year 2018, ending Sept. 30.
- Operating income for the period was $11.5 million versus $172.6 million the previous year, according to consolidated financial statements.
- Revenue declined 1.9% to $5.55 billion, from $5.66 billion in the same period the prior year. The company attributed the decline to the divestitures of Saint Joseph Hospital in Marshfield, Wisconsin, in June and Door County Hospital in Wisconsin in October 2016.
Extreme weather conditions during Hurricane Irma also contributed to a drop in same-facility equivalent discharges, inpatient admissions, inpatient surgeries, outpatient surgeries, observation days and emergency room visits in Ascension’s Jacksonville, Florida, facilities.
Total operating expenses rose 0.2%, due largely to higher purchased service and professional fee, labor and supply spend. Ascension tied a 7.6% jump in uncompensated care costs to changes in certain states’ Medicaid programs that resulted in lower reimbursement.
The stark drop could be behind possible merger talks between Ascension and Providence St. Joseph Health. The Wall Street Journal broke the news Sunday, but noted a merger is “far from assured” and that the talks include other potential deals as well.
If the nonprofit systems did strike a deal, it would create the largest hospital operator in the country, with 191 hospitals in 27 states and annual revenue of about $45 billion — surpassing HCA.
Hospitals are looking at divestitures and mergers as ways to survive in difficult financial times with smaller reimbursements and lower patient volumes. Pressure to shift more patient care to outpatient settings is also chipping away at hospitals’ traditional revenue base.
Ascension reported net impairment, restructuring and nonrecurring losses totaled $50.7 million in the first quarter, up from $5.6 million in the prior year’s period. Contributing to the losses was $10.5 million in expenses associated with implementing an enterprise resource planning system, one-time termination and restructuring expenses, Hurricane Irma and other nonrecurring expenditures such as impairments and software implementation, the company said.