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Q2 Earnings a Mixed Bag for Nonprofit Hospitals

Analysis  |  By Jay Asser  
   September 14, 2023

A look at three health systems that were up and three that were down in the second quarter of the year.

Nonprofit hospitals and health systems are beginning to claw their way back from the struggles of 2022, but challenges persisted in the first half of this year.

Second quarter earnings reports revealed nonprofits continue to deal with high operating expenses, which has restricted financial flexibility.

The good news is patient volume and utilization is on the rise, resulting in some health systems reporting positive operating margins.

Here's a look at notable second quarter earnings among nonprofits:

In the black

Halfway through its first full year since merging, Advocate Health reported an operating margin of 0.6% and $996.7 million of excess revenue over expenses. The health system is one of the largest nonprofits in the country after last year's merger combined Advocate Aurora Health and Atrium Health.

Advocate Health's second quarter saw $75.3 million in operating income, a significant improvement over the $10.4 million in its inaugural quarter. Through the first half of the year, outpatient visits increased 6.5% while physician visits rose 7.3%. The health system's bottom line was also helped by $938.4 million in net investment income.

Advocate also made a change in leadership, with CFO and executive vice president Anthony DeFurio resigning from his role, paving the way for Bradley Clark, senior vice president and treasurer, to step in as interim CFO.

Another health system that merger last year, Intermountain Health, similarly benefited from significant investment income of $909 million in the first half of the year to produce almost $1.1 billion in net gain.

Expenses, however, jumped from $5.9 billion to $7.4 billion year-over-year, resulting in operating income falling to $184 million, compared to $285 million through the first six months of 2022.

Elsewhere, Kaiser Permanente reported a net income of $2.1 billion in the second quarter—a strong recovery from the $1.3 billion in loss during the same period last year.

The integrated healthcare delivery organization experienced a whopping rise in operating income to $741 million, compared $89 million in the second quarter of 2022.

Once again, hefty investment income of $1.3 billion boosted financials, but Kaiser warned it tends to see lower operating margins in the second half of the year due to expenses going up.

In the red

Other health systems haven't been as fortunate through the first half of the year, such as Providence Health & Services, which reported an operating loss of $202 million for the second quarter.

Still, it was an improvement over the $424 million operating loss the nonprofit suffered in the second quarter of 2022, leading to a cost-cutting restructuring.

Rising inpatient admissions (2%), non-acute volume (6%), and outpatient surgeries and procedures (17%) helped Providence continue to fight its way back, but operating expenses also increased 7% year over year through the first six months.

SSM Health also experienced an operating loss $39.6 million in the second quarter yet improved on the $49.8 million loss during the same in 2022.

It marked consecutive quarters of operating loss for the St. Louis-based health system, which lost $16.5 million in the first three months of the year. Operating expenses increased 11.9% to $2.64 billion, in-line with other nonprofits.

Elsewhere, UPMC regressed after a promising first quarter that netted a $31.5 million gain, reporting $85.8 million in operating loss for the second quarter for a drastic 82% drop.

The integrated nonprofit system dealt with expenses rising 11.2% year over year to $13.8 billion, bringing down its operating margin for the year to 0.1%.

Jay Asser is the contributing editor for strategy at HealthLeaders. 


Rebounding patient demand helped alleviate rising expenses as operating margins varied between nonprofit health systems in second quarter earnings reports.

Advocate Health, in its first half year of reporting earnings since merging, boasts a positive operating margin.

Health systems like Providence and SSM Health continued to report losses, but have shown improvement year over year as they work to trim down expenses.

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