Dive Brief:
- MedStar took a multimillion-dollar hit on investment losses for the third quarter of this year, canceling out a rise in revenue from its managed-care program and other operating business units.
- The Columbia, MD-based company reported a $21.9 million operating surplus from $1.2 billion in revenue for the third quarter of 2014, but took a $40.9 million loss on investments, blaming "investment markets' below-budget performance" for the hit. At the end of the day, it amounted to a $7.8-million deficit for the quarter.
- On the upside, the company thumped expectations with a 28% climb in its operating surplus going into the new year, which is more than twice what the company had in the budget. An 81.2% rise in premium revenue fueled that increase, but the loss made that gain a pyrrhic victory—though a good portent for the future.
Dive Insight:
Despite the deficit, MedStar finds itself in a good place moving into the new year, though some tough questions will be asked regarding its investments moving forward. In the third quarter, the Dow Jones was up 1.87%, and the S&P 500 was up 1.13%, making it easy to wonder what went wrong.
The company's managed care plans are looking great going into 2015. Revenue from MedStar Family Choice premiums jumped 81.2% to $131.2 million since last year, a figure that is 20% higher than projections.
Overall, the program provides Medicaid and Medicare managed-care services for 109,000 members in Washington, DC, Maryland and Northern Virginia, and was responsible for 10.9% of the company's Q1 haul, up from 6% in 2013. Finally, the Family Choice program picked up almost 38,600 more members during the last 12 months, an increase of slightly more than 54%.
Despite its current investment troubles, MedStar is not likely to be on the ropes for long. Last month, the not-for-profit inked an unprecedented 7-year IT deal with tech provider Cerner to expand enterprise EMR and help with streamlining operations, improving care and developing new technologies that support MedStar's plans. Stronger IT will continue to increase efficiencies with both accounting and patient care, and keep MedStar a step ahead in an industry that is beginning to understand the inherent value of digital data.
