- Baylor Scott & White posted a more than 13% drop in operating income to $644 million in the six months ended Dec. 31, compared to the same period a year ago, as higher operating expenses outpaced increases in revenue and patient volumes.
- Rising costs for employee wages and supplies were the main culprit driving a 12.6% jump in total operating expenses to $5.72 billion over the six-month period, the 51-hospital system said in its financial report.
- Total operating revenue rose 9.3% to $6.36 billion in the six months through December. Net patient care revenue increased 12.4% to $5.21 billion, mainly due to higher volumes and higher acuity cases.
Dallas-based Baylor Scott & White is the largest nonprofit healthcare system in Texas, a state that saw hospital admissions spike in August as the delta variant spread and again in late December as the omicron variant surged across the country.
Hospitals nationwide have raised wages to attract and retain healthcare workers amid nationwide labor shortages during the COVID-19 pandemic, and they are expected to face continued pressure on profit margins from escalating expenses. Nurses are in high demand, and the worker scarcity is prompting costlier responses such as improved benefits packages and greater use of more expensive temporary help.
Meanwhile, supply chain snarls including challenges in sourcing materials are driving up hospital expenses and generally hurting hospitals' financial performance, according to a recent report from Kaufman Hall that found the median change in hospital operating margins from December 2019 to December 2021 was a decline of 14.7%, excluding coronavirus federal relief funding.
Baylor Scott & White said its expenses for salaries, wages and employee benefits for the six months through December rose nearly 12% to $2.87 billion, while supplies and other operating expenses increased about 14% to $2.15 billion.
Adjusted EBITDA was $1.27 billion in the six-month period, up from $1.08 billion a year ago.
The integrated system, which operates the Baylor Scott and White Health Plan, said medical claims rose 13.8% to $412 million, primarily because of higher Medicaid and individual exchange membership, COVID-19 variant costs and drug pricing trends.
Premium revenue fell 2.6% to $763 million, mostly due to the settlement of a lawsuit related to the Affordable Care Act and losses incurred in the exchange market. The decrease was partly offset by increased Medicaid and individual exchange membership.
Baylor Scott & White earlier this month announced that Julie Creamer will join the organization as president on March 7, after a 40-year career at Northwestern Medicine in Chicago. She most recently was president of Northwestern Memorial Hospital and the system's rehabilitation hospital. In her new role, she will oversee the system's clinical, operational and information services functions.