Mass General Brigham virtually reversed its earnings for the quarter ended June 30 compared to the same time in 2021, posting a $120 million operating loss and $949 million overall net loss one year after notching respective $128 million and $870 million gains.
“The challenges we face are significant,” Anne Klibanski, M.D., president and CEO of MGB, said in a statement. “The national labor shortage continues, leading to higher costs and contributing to ongoing severe capacity constraints.”
These industrywide high labor expenses joined higher acuity patients and a rough investment market as the primary culprits of the nonprofit system’s fiscal third quarter, according to financial documents recently filed by MGB.
While total operating revenue rose year over year from $4.08 billion to $4.26 billion, MGB noted extended lengths of stay, and that decreased discharges by 5%, trimmed patient care revenue growth and increased per-patient costs.
Still, the system attributed much of the quarter’s 11% year-over-year operating expense increase to an 11% rise in wages (including temporary staffing) and a 10% jump in employee benefit costs. Operating expenses totaled $4.4 billion for the quarter.
“Despite the rapid decline of the winter omicron surge, staffing shortages have led to higher sustained labor costs while exacerbating the strain on system-wide inpatient capacity,” MGB Chief Financial Officer and Treasurer Niyum Gandhi said in a statement. “As these challenges are unlikely to subside in the near term, we must continue and even accelerate our efforts to improve efficiency, deliver care in the most appropriate and convenient settings, and integrate payer and provider capabilities to improve affordability for patients.”
MGB ended the quarter with a -2.8% operating margin, comprised of a $121 million loss (-3% operating margin) from its provider activity and a $1 million gain (0.3% operating margin) from its insurance activity.
Outside of these, the system noted a 10% year-over-year gain in research revenue and a 22% rise in other operating revenue driven by outpatient pharmacy.
During the same quarter in 2021, MGB had logged a 3.1% operating margin headlined by $135 million from the provider side (3.5% operating margin) and trimmed by a $7 million loss from its insurance activity (-2.9% operating margin).
MGB reported an $829 million loss outside of its operations “reflecting heightened unfavorable volatility in the financial markets,” compared to the previous year’s $742 non-operating gain.
The latest quarter builds on a rough year for one of the country’s largest nonprofit health systems.
MGB had reported operational income of $10 million and an overall gain of $105 million but saw its fortunes quickly turn during the following quarter with a $193 million operational loss and an overall loss of $866 million.
Taken together, MGB has seen a $303 operational loss (-2.4% operating margin) and an overall $1.7 billion loss during the first nine months of its current fiscal year.
The story is not so different from the rest of the country’s other larger nonprofit providers.
In recent weeks Kaiser Permanente logged a nearly $1.3 billion net loss and 0.4% operating margin for its quarter ended June 30, citing similar high expenses and a challenging investment market. Nearby Sutter Health also posted a $457 million net loss and 0.6% operating margin during the most recent quarter.