Dive Brief:
-
Norton Healthcare reported $44.8 million in operating income for the first six months of the year, which was a 23% decrease from $58.5 million last year.
-
The Louisville-based company said the loss was because of a lower patient service margin.
-
Norton Healthcare increased year-over-year revenue in the first six months by $27.8 million to $1.1 billion.
Dive Insight:
The latest disappointing numbers come after Norton announced positive 2016 results in April. At that time, the company reported its 2016 revenue increased by $92.4 million to $2.1 billion from 2015. However, the system said its expenses rose by 6% in 2016 because of adding more providers and employers. The nonprofit Norton Healthcare is the Louisville-area’s third largest private employer with 210 locations in the Greater Louisville and Southern Indiana area, including five Louisville hospitals.
Norton’s drop in operating income has become the norm for many hospitals. Both for-profit and nonprofit health systems are struggling to reach profitability. Health systems struggling to gain profitability often blame lower patient volumes or sagging reimbursement.
In recent weeks, Community Health Systems (CHS) announced a $131 million operating loss for the second quarter, which was the fifth consecutive quarter it posted a loss. The trend isn't universal, however. Quorum Health reported that its second-quarter revenue was $530.1 million, which was slightly better than $529.7 million last year.
A small nonprofit like Norton needs to find scale, which often results in partnering with other facilities and removing redundant services.
Hospital and health system mergers and acquisitions increased 15% in the second quarter this year with large health systems especially active. There were six transactions of health systems with nearly $1 billion or more in revenues in the first half of this year compared to four in all of last year. Expect M&A activity to remain active in healthcare as systems look for avenues to profitability.
Other systems, regardless of size or geographic location, are looking at mergers and acquisitions as a way to either shed debt or gain scale or market share. CHS is looking to divest 30 hospitals this year in hopes of cutting its $15 billion debt. While CHS is looking to cut facilities, HCA wants to gain more hospitals. The health system recently announced it will offer senior secured notes to fund hospital purchases.