Ascension ekes out 0.2% operating margin amid COVID disruption and slowing federal relief

Ascension saw its operating margin tighten to just 0.2% during the quarter ending Dec. 31, 2021, due to persistent COVID-19 disruptions, rising costs and diminishing federal relief funding.

The faith-based system saw just over $6.1 million in operating income during its most recent quarter, well below the $652 million logged during the same period last year.

This follows a similarly tight performance during the first quarter of Ascension’s fiscal 2022, which boasted $25 million operating income for a 0.4% operating income (also down from the previous year’s $143 million and 2.2%).

However, Ascension’s management noted in its filings that the organization had recognized roughly $234 million in COVID-19 funding revenue during the first and second quarter of fiscal 2022, “a significant decrease from the $779 million recognized during the respective six months of the prior fiscal year,” they wrote.

Similar to recent financial reports from other systems, the 142-hospital system outlined gains in patient service revenue offset by greater operating expenses associated with higher supply and contract labor expenses.

The quarter’s $6.48 billion in net patient service revenue came in higher than the previous year’s $6.20 billion, with six-month numbers for the respective years landing at $12.87 billion and $12.18 billion, according to the system’s report.

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Total operating expenses, meanwhile, grew year-over-year from $6.71 billion to $7.27 billion for the quarter and from $13.22 billion to $14.19 billion year to date, according to the filing.

Here, management highlighted a 5.3% year-over-year increase in same-facility cost per equivalent discharge for the first half of the fiscal year, as well as an 8.7% year-over-year increase in total salaries, wages and benefits and a 3.2% year-over-year increase in supply expenses.

Driving both revenue and expenses were volume gains across most categories. Year-to-date equivalent discharges grew 3.5% year over year while total admissions were up 1.6%, emergency room visits were up 18.2%, physician office and clinic visits were up 6.5% and urgent care visits were up 43.5%.

Still, the totals remain below what Ascension was seeing prior to the pandemic, according to management. Additionally, elective procedures and surgeries for the quarter were hit by COVID-19 disruptions, leading same facility inpatient and outpatient surgery visit volumes to decline 1.4% from the first half of the previous year.

Ascension said that its long-term investment funds were hit with volatility and moderation from the prior year, yielding the system $1 billion over the past six months whereas the year prior saw a $3.3 billion return.

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Ascension has $23 billion in unrestricted cash and investments as of Dec. 31, 2021, as well as 312 days of cash on hand. It provided $1.07 billion in care of persons living in poverty and community benefit during the first half of the 2022 fiscal year, as opposed to $1.23 billion during the prior year’s equivalent period.

Ascension’s roughly 2,600 sites of care are spread across 19 states and the District of Columbia. Alongside its 40 senior living facilities and 142 hospitals (down from 146 hospitals at the fiscal year’s end), the nonprofit employed about 142,000 staff and had 40,000 aligned providers as of Dec. 31.

The system has weathered extreme volatility during the pandemic but ultimately rebounded with a $676 million operating income and investment-buoyed $5.7 billion net income during the 2021 fiscal year ended June 30, 2021.