Trinity Health doubles last year's operating losses, still logs $1B net income

Trinity Health has wrapped its fiscal year with escalating operating losses but a nearly $1 billion bottom line, according to recently published financial statements.

The Livonia, Michigan-based system logged a $431.7 million operating loss (-2% operating margin) during the 12 months ended June 30, 2023, which was more than double the previous year’s $206.3 million loss (-1% operating margin).

“As a response to the challenges faced in operating performance during fiscal years 2023 and 2022, the corporation is focused on clinical optimization and access, revenue growth opportunities, labor retention, recruitment and stabilization, and continued cost reduction plans to improve operating performance which will continue into fiscal year 2024,” Trinity’s management wrote in a summary of its annual performance.

Total operating revenues rose 8.3% to almost $21.6 billion but were outmatched by the steeper 8.9% increase in total expenses, which landed at nearly $21.9 billion. The revenue increase came despite a $139.7 million reduction in Provider Relief Fund money, management noted in a release.

Rather, Trinty’s gains stemmed from an additional $1.6 billion in operating revenue generated by the Catholic system's acquisitions: MercyOne in Iowa, North Ottawa Community Health System in Michigan and Genesis Health System in Iowa and Illinois. Excluding those deals, and the divestiture of St. Francis Medical Center, Trinity ended the year with just a 0.7% year-over-year rise in operating revenue, the system said.

Volumes, which Trinity measures by case mix adjusted equivalent discharges, rose 1.6% on a same-facility basis. Management noted that the stabilizing inpatient volumes “may not return to pre-pandemic levels” and that the majority of its revenue is now comprised of outpatient and other non-patient revenue.

“The corporation continues to diversify its business segments to shift towards ambulatory, home health, PACE [program of all-inclusive care for the elderly], urgent care, specialty pharmacy and digital telehealth care in order to gain a better position for balanced performance when individual segments are challenged,” management said.

Trinity’s acquisitions similarly made up the bulk of its total operating expense increases; excluding their $1.7 billion left the system with a 0.9% year-over-year increase.

Management wrote that per-case total operating costs improved during the second half of the fiscal year as the organization “continues to tightly manage operating costs amid inflation.” Though same-facility salary, wage and benefit costs rose 2.5% and supply costs rose 1.8%, management highlighted executive compensation reductions, reduced contract labor spending and lower per-case supply spending as mitigating factors.

“The corporation continues to use strong cost controls over contract labor and other operational spending as colleague investment and utilization of its FirstChoice internal staffing agency promotes labor stabilization,” management wrote. “On a same facility basis, contract labor costs decreased $250 million, or 40.6%, compared to fiscal year 2022 which included unprecedented contract labor utilization as a result of the pandemic.”

Investment earnings and equity in earnings of Trinity’s unconsolidated affiliates helped compensate for the system’s tough operations, with the former logging a $715.6 million gain and the latter a $421.9 million gain. Total nonoperating items for the year landed at an almost $1.5 billion net gain, contrasting the prior year’s $1.2 billion loss.

Altogether, Trinity reported a $959.7 million excess of revenue over expenses (net of noncontrolling interest) as opposed to last year’s over $1.4 billion net deficiency.

Trinity is among the country’s largest health systems with 88 acute care hospitals and hundreds of other care locations in 26 states as well as the country’s second-largest Medicare PACE program.

As of June 30, Trinity sat at $32.3 billion in total assets and $18.3 billion in net assets. It reported 178 days of cash on hand and almost $1.5 billion total community benefit ministry in the most recent fiscal year.