Higher volumes and cost-cutting programs allowed Livonia, Michigan-based Trinity Health to trim its operating losses in the first quarter of its 2024 fiscal year.
The 88-hospital Catholic system reported a $58.6 million operating loss (-1% operating margin) for the three months ended Sept. 30, an improvement over the $146.3 million operating loss (-2.9% operating margin) of the first quarter of a year prior. It also improved its bottom line as it reported a $211.5 million net loss, compared to a $565 million net loss a year ago.
The system reported a 12.5% increase in operating revenue to $5.6 billion as well as an 11.6% rise in net patient service revenue to $4.8 billion.
But Trinity’s business is somewhat different than it was a year prior—alongside industrywide improvements in patient volumes, the jump was largely fueled by Trinity’s acquisitions: MercyOne in Iowa, North Ottawa Community Health System in Michigan and Genesis Health System in Iowa and Illinois. These pickups contributed $453 million of the $620.2 million operating revenue increase, according to the filing, though they were partially offset by $31.2 million from the divestiture of St. Francis Medical Center in New Jersey.
Excluding the acquisitions and divestiture, Trinity’s operating revenue increased by 4.1% year over year. Net patient service revenue, without the dealmaking, rose 2.9% due to favorable changes in volumes, payment rates and case mix.
Trinity’s operating expenses rose 10.3% to $5.7 billion year over year, but just 1.7% when excluding the acquisitions and divestiture.
In comments on the quarter’s performance, the system highlighted flat per case total operating costs amid efforts “to tightly manage operating costs amid inflation.” Same-facility salaries, wages and employee benefit costs rose 2.9% year over year—which Trinity counted a victory in light of “industry-wide staffing shortages and wage inflation—while supply spending as a percent of net patient service revenue was reduced by 1%."
“The corporation continues to use strong cost controls over contract labor and other operational spending,” Trinity wrote in commentary accompanying its quarterly filing. “Labor stabilization is occurring with investments in its FirstChoice internal staffing agency and TogetherTeam Virtual Connected Care model [which is being implemented system-wide]. On a same-facility basis, contract labor costs decreased $10.7 million, or 13.4% compared to the prior fiscal year. Further expense reductions were seen in depreciation and amortization, occupancy and other expenses.”
Trinity’s non-operating losses dropped from last year’s $404.6 million to $139.2 million, a “considerable improvement” the system chalked up to reduced losses from its investments.
The system’s days of cash on hand dipped from 178 days at the end of fiscal 2023 (June 30, 2023) to 167 days as of Sept. 30. Its historical debt service coverage ratio is 2.44x, well above its 1.1x requirement.
The Catholic nonprofit recently wrapped a 2023 fiscal year of heavy operating losses ($431.7 million; -2% operating margin) but a nearly $1 billion bottom line.
In comments included alongside year-end filings and the most recent quarter, Trinity acknowledged that “inpatient volumes are stabilizing to a new normal that may return to pre-pandemic levels.” The system highlighted that the majority of its revenue comes from outpatient and other non-patient revenue sources, and said that it “continues to diversify its business segments to gain better position for balanced performance when individual segments are challenged.”
Trinity’s operating challenges still pale in comparison to those of its fellow large Catholic nonprofits. CommonSpirit Health, for instance, kicked off its 2024 fiscal year with a $441 million operating loss (-5.1% operating margin). Providence notched a $310 million operating loss (-4.3% operating margin) in its most recent quarter.