Tighter Q3 trims Advocate Health's 2023 operating margin, net income
21 Nov 2023
Financial StatementAHA
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Source: FierceHealthcare
Recently formed Advocate Health's strong inaugural year was held in check by tighter operations and vanishing investment returns. Still, each of the nonprofit juggernaut's divisions reported higher patient volumes and increases in revenues.
Advocate Health, the system formed out of last year’s Advocate Aurora Health and Atrium Health merger, saw its strong inaugural year take a step back during the third quarter, according to financial information published Monday.
The 67-hospital nonprofit reported a nine-month operating income of $79.4 million (0.3% operating margin), a slight dip from the $85.7 million (0.6% operating margin) it had logged at the midyear mark.
Advocate Health saw more substantial cuts across its nonoperating income and bottom line. The former landed at $685.8 million across nine months, a $255.5 million (27.1%) investment return-fueled reduction from the six-month total. The latter, revenue in excess of expenses, was $721.2 million across nine months, which was $276.7 million (27.7%) lower than the midyear’s total.
Total revenue was $22.8 billion year to date, with annual year-over-year increases seen across each of the system’s divisions (Advocate Aurora Health, Atrium Health’s Charlotte-Mecklenburg Hospital Authority and Atrium Health Wake Forest Baptist).
Reports from the divisions generally highlighted increases in patient volumes and declines in acuity compared to their group’s prior-year third quarters. Alongside these, the report for Atrium Health alone included comments giving credit to annual reimbursement rate increases and growth in retail pharmacy sales for its 11.9% rise in nine-month total operating revenue.
Expenses across the full organization were just under $22.8 billion year to date. This similarly reflected increases across all three of Advocate Health’s groups, which saw substantial spending bumps in salaries, wages and benefits as well as supplies and drugs.
As of nine months, the full Advocate Health system has seen over 382,300 discharges, 137,400 observation cases and 327,700 total surgeries. Cumulative average inpatient length of stay and case mix index each saw minute decreases from the end of June.
As of Sept. 30, Advocate Health reported more than $42.2 billion in total liabilities and net assets and nearly $1.4 billion of cash and cash equivalents, the latter of which saw a $49.8 million net decrease across the third quarter.
Now the fifth-largest nonprofit health system in the country, Advocate Health employs more than 150,000 people and serves 6 million patients per year across Illinois, Wisconsin, North Carolina, South Carolina, Georgia and Alabama. It brought in roughly $27 billion in annual revenues during 2022, based on Advocate Aurora Health and Atrium Health’s combined full-year numbers.
Higher volumes but a slight operating pullback have been frequent themes across health systems’ third-quarter financial reports. Among the major nonprofits, Sacramento-based Sutter Health slipped to a -0.1% operating margin for the third quarter, Chicago-based Catholic giant CommonSpirit Health opened its fiscal year with a -5.1% operating margin and Rochester, Minnesota-based Mayo Clinic held strong at a 6.8% operating margin for the third quarter.
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