Advocate Aurora Health posted $558 million in earnings for 2020, down by more than half from the $1.4 billion it posted in 2019 as expenses from the pandemic have taken a toll.
The not-for-profit, 26-hospital system said in its latest earnings report, posted Monday, that it generated $13.1 billion in total revenue for 2020, up 2.6% from 2019. Advocate Aurora is the latest hospital system to end 2020 in the black.
“The total impact of the COVID-19 pandemic on the system is difficult to predict and could adversely impact the business, investment portfolio, financial condition or results of operations and, accordingly, may have a material adverse impact on the financial condition of the system,” according to Aurora’s earnings report. “The system is monitoring liquidity and cash flow has taken, and will continue to take, step to protect its fiscal health.”
Advocate Aurora’s patient service revenue was down by 4.2% in 2020, generating $444 million overall.
“The decrease was primarily due to a decrease in total patient volumes over the comparative period and an increase in bad debt as a result of the COVID-19 pandemic,” the report said.
Like other systems across the country, Advocate paused or canceled elective procedures at the onset of the COVID-19 pandemic. But while volumes have rebounded, they still remain down compared to pre-pandemic levels at the end of the year.
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Advocate reported hospital outpatient visits were down 20% from 2020 to 2019, and physician visits declined by 11%.
The system, however, recognized $786 million in federal relief funds passed under the CARES Act.
As volumes have declined, expenses for wages and supplies have grown. Advocate said salaries, wages and benefits increased by 6.3% in 2020 compared to 2019. The expenses of supplies and purchased services increased $201 million, a boost of 5%.
Several for-profit and not-for-profit hospital systems have been able to post profits in 2020 thanks to greater access to liquidity to buttress against the losses from patient service revenue.
As of the end of 2020, Aurora had lines of credit agreements with banks for $1.4 billion. It has 334 days of cash on hand as of the end of the year compared to 274 days at the end of 2019.
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The reason is primarily the deferral of employer payroll taxes under the CARES Act and advance Medicare payments that the system must pay back. Without the deferred taxes or advance payments, the system would have had 305 days of cash on hand.
Advocate Aurora was also still able to continue capital expenditures and construction projects in 2020, items some hospitals paused after the initial financial fallout of the pandemic.
The system is either working on or has completed four significant capital projects, including an expansion of an ambulatory Center for Advanced Care.
“Management continues to evaluate planned capital projects and routine capital expenditures with a focus on liquidity needs, operating margin considerations and alignment with the strategic plan,” the earnings report said.