The midyear mark of fiscal year 2022 saw nonprofit Trinity Health reporting a 0.4% operating margin before pandemic relief and other items, translating to an operating income of just $38 million.
Including relief and other items such as the sale of Trinity Health’s 50% stake in Gateway Health Plan brought Trinity’s operating margin and income up to 2.9% and $295.8 million for the first six months of fiscal 2022, according to the Catholic health system.
In earnings for the quarter ended Dec. 31, 2021, published Friday, the Catholic health system announced $10.1 billion year-to-date operating revenue (3.5% year-over-year growth) excluding $130.6 million in recognized Provider Relief Fund grant revenue.
Net patient service revenue grew by $329.2 million (4%) over the previous year’s first two quarters, “primarily due to same facility increased volume and payment rates, which were partially offset by less favorable payor and case mix,” the system wrote in its filing.
At the same time, Trinity wrote that patient volumes are recovering despite pandemic surge fluctuations but are still short of the numbers seen prior to the pandemic.
Case mix-adjusted discharges rose 0.4% over the previous year after adjustment for locations that have since been sold off. Emergency room visits rose 9.1% year over year while surgeries have decreased 2.4% year over year, with the organization specifying that elective surgery suspensions have been voluntary and not the result of limited capacity.
However, Trinity’s gains were kept in check by matching increases on the other side of the ledger.
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According to the filing, Trinity’s year-to-date operating expenses rose by $483 million (5%) year over year to $10.1 billion.
The increase was “primarily” due to a $401.3 million year-over-year increase in labor costs. More specifically, the operating expense increases included $246.7 million in salary and wage increases (1% increase in full-time equivalents, 4.9% increase in rates), a $161.9 million increase in contract labor (156.4% increase), a $57.8 million increase in supplies and a $46.8 million rise in purchased services and medical claims.
A substantial dip in investment returns was the primary culprit behind Trinity’s year-over-year decline in nonoperating gains, which fell from $2 billion to $627.2 million. Together, total excess of revenue over expenses for the first half of fiscal 2022 was $878.1 million (net margin 8%), down from $2.7 billion (22.2%) from the prior year.
Trinity said it currently has $13.3 billion in unrestricted cash and investments, with 254 days of cash on hand. It has so far repaid $352.7 million of its Medicare cash advances during fiscal year 2022 and has $943.8 million remaining as of Dec. 31, 2021.
Trinity Health is among the largest nonprofit health systems in the country with 88 hospitals, 115,000 employees, an estimated $20 billion in annual revenue and roughly 1.4 million patients served per year.
Thin or even operating margins look to be the theme among nonprofit health systems' latest quarter.
Ascension, for instance, eked out a 0.2% margin with $6.1 million in operating income while CommonSpirit Health ate $81 million in operating losses.