Nonprofit hospitals squeezed by pricier labor, investment losses in Q1

Nonprofit hospitals faced a tough first quarter with many reporting net losses amid escalating expenses for pricier labor and diminished investment returns.  

“This first quarter of the calendar year here is going to be just one of the worst for most of our providers,” Fitch Analyst Kevin Holloran said last week on a webinar. 

Fueled by the latest coronavirus variant, hospitals again were confronted with a January wave of COVID-19 cases and hospitalizations, which can crowd out elective procedures and cause patients to pause planned procedures.

The need for labor was in high demand during the January surge, further increasing expenses year over year amid record inflation in the U.S. that has led to costlier goods and services.

Some of the nation’s largest nonprofit health systems have reported both operating and net losses for the three months ended March 31, including Ascension and CommonSpirit.

Ascension reported an operating loss of about $671 million, widening its loss from about $17 million during the same period last year.

Investment losses helped fuel the St. Louis-based system’s overall net loss of about $885 million for the three months ended March 31, which is Ascension’s third quarter with a fiscal year end of June 30.  

CommonSpirit Health recorded a similar experience, reporting both an operating loss of $591 million and net loss of $592 million. 

Federal relief funds helped make up for lost revenues amid the pandemic, but health systems received the bulk of those funds prior to this year. 

CommonSpirit received $20 million in provider relief funds for the nine-month period ended March 31, compared with $617 million during the same time last year.   

Intermountain Healthcare recorded a similar experience in the first quarter of the year. 

The Salt Lake City-based health system’s operating income of $130 million was nearly cut in half from $246 million during the prior-year period. The system reported a net loss of $298 million driven by investment losses.

The hospital sector will remain under pressure this year, especially if there are additional surges, which government officials warn are possible, Holloran said.   

“It’s a difficult point in time right now,” Holloran said of the already low-margin sector. 

Providence, the Washington-based health system that treated the first recognized COVID-19 patient in the U.S., reported both an operating and net loss for the quarter.

The past two years have been challenging, but 2022 “may be the biggest challenge yet,” Providence CFO Greg Hoffman said in a statement. “Rising costs due to inflation and the health care labor crisis are putting significant pressure on major U.S. health systems, some of whom have reported significant operating losses this quarter,” Hoffman added.  

The hospital lobby is urging Congress to replenish the provider relief fund and provide flexible repayment terms for advanced Medicare repayments. 

Accelerating expenses at hospitals is unsustainable, the American Hospital Association said recently in a report illustrating rising expenses.

Meanwhile, insurers reported rising profits in the first quarter and increased financial projections for the full year. 

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