The organization attributed its lackluster earnings results to continued pressures from rising expenses, labor shortages, and capacity constraints.
Mass General Brigham, a not-for-profit, integrated healthcare system based in Boston—has ended fiscal 2022 with an operating loss of $432 million (-2.6% operating margin) and a net loss of $2.3 billion.
The organization attributed its lackluster earnings results to continued pressures from rising expenses, labor shortages, and capacity constraints. Mass General Brigham also cited "heightened unfavorable volatility in the financial markets" as another contributing factor to its fiscal year operating loss. The system also reported total revenue of $16.7 billion for fiscal 2022.
"Healthcare is facing an unrelenting economic crisis that is impacting patients’ ability to access care. It is our responsibility at Mass General Brigham to continue to provide high-quality care while being good fiscal stewards on behalf of the 1.7 million patients whom we care for," Anne Klibanski, MD, President, and CEO of Mass General Brigham, said in the earnings release. "While what we are experiencing today is unprecedented, it’s important to remember that we have overcome challenges before during our long history. The stress placed on our workforce and our system over the past several years has been enormous, and the employees at Mass General Brigham continue to show strength and resiliency. We are confident that thoughtful and strategic decision-making coupled with efficient resource management will enable us to continue investing in critical medical research, education, and the communities we serve, while ensuring that we can care for every patient who needs us."
For the 2021 full year, Mass General Brigham reported an operating income of $442 million. This includes $232 million of permanent grants from the CARES Act, which were used to prevent, prepare for, and respond to cases of COVID-19, and $30 million in Affordable Care Act risk corridor program subsidies for insurance coverage provided from 2014 to 2016. Excluding these funds, operating income was $180 million (1.1% operating margin), including income from provider activity of $203 million (1.4% operating margin) and a loss from insurance activity of $23 million (-2.5% operating margin). The system reported an overall gain of $3.2 billion in 2021.
"Heading into 2023, we are employing strategies and tactics to address capacity challenges and ongoing inflationary pressures on labor and supplies costs, including a heightened focus on clinical integration to enhance patient care efficiencies and resource stewardship. We have also prioritized engaging with Mass General Brigham’s leaders who are closest to the programs and services delivering care across the system to identify the most thoughtful and targeted approach to reducing costs," Niyum Gandhi, Chief Financial Officer, and Treasurer at Mass General Brigham said in the release. "Simultaneously, we are taking the next steps in transitioning our care model to one based on value rather than volume, facilitated by the launch of a zero premium Medicare Advantage plan, moving approximately 140,000 Medicaid members into a full-risk program and demonstrating our commitment to improving the affordability of patient care."
Continuing turnover among nursing staff can cost hospitals between 5.2 million and $9 million.
University of Michigan Health West—a healthcare provider with over 208 staffed beds and more than $1 billion in total patient revenue—has teamed up with Grand Rapids Community College to offer a program designed to help nursing students finance their education and at the same time fill a critical labor shortage.
"By removing cost barriers—including for adult learners and others who need to continue working while finishing their education—the program creates and nurtures a diverse pipeline of local healthcare talent," Dr. Peter Hahn, UMH-West CEO, said in an emailed press release. "We see this as an investment not just in our workforce but in West Michigan itself. This is a way to ensure that the new generation of rising healthcare leaders reflects the communities we serve."
The program was launched this month and was made possible thanks to a grant from the University of Michigan Health-West Foundation. Students who have completed one semester of GRCC’s Nursing Program can apply for the program and have up to three semesters of their GRCC tuition paid by UMH-West. They must commit to working at UMH-West for two years upon completion of the GRCC program and becoming licensed as registered nurses. During their employment with UMH-West, the organization will support the completion of a bachelor’s degree in nursing through existing partnerships and tuition reimbursement.
Hospitals and health systems across the U.S. are dealing with a shortage of nurses and have started relying on travel nurses, which are a greater expense than having their own RNs on staff. The U.S. Bureau of Labor Statistics predicts more than 203,000 openings for registered nurses each year through 2031. This continuing turnover can have a dramatic financial impact on organizations. The average cost of turnover for a bedside RN is $46,100 resulting in the average hospital losing between $5.2 million and $9 million, according to research from NSI Nursing Solutions.
The program aims to get 10 to 15 nursing students to sign up in December and graduate in April 2023. The program seeks to enroll 10 more nursing students each of the next three semesters: December 2023, April 2024, and December 2024.
"Partnerships make communities stronger," Dr. Juan Olivarez, GRCC’s interim president, said in the same release. "This program’s innovative approach is a great example of how working together creates opportunities for students while helping healthcare providers and our greater community."
It's been another challenging year for healthcare, but these CFOs have created unique ways to maintain their organizations' bottom line.
Hospitals and health systems have had a rough go of it through 2022, as persistent challenges such as inflation, rising expenses, labor shortages, and consequences of the pandemic all impact their bottom line.
Hospital margins have been pressured for most of the year, with recent Kaufman Hall data showing negative margins for the ninth consecutive month, leading analysts to conclude that these organizations will finish the year in the red.
"Without a positive margin, there is no mission," Matthew Bates, managing director and Physician Enterprise service line lead with Kaufman Hall recently told HealthLeaders in an email statement. "Health systems must think carefully and strategically about what areas of care they invest in for the future."
Over the course of 2022, HealthLeaders has connected with several hospital and health system CFOs to gain thoughtful insight and strategy into how they are solving the most vexing financial challenges impacting healthcare providers. The following is a collection of CFO responses from various articles published by HealthLeaders in 2022.
HealthLeaders: How can hospitals and healthcare systems cut costs without sacrificing their workforce?
JoAnn Kunkel, CFO, LCMC Health: It's about being more efficient and having people work to the top of their ability. It's about being able to focus on what's important and making sure that you're automating what you can and supplementing with resources to help people work at the top of their skill sets. We must look at things like that as we move forward and plan for the future. You must have the right number of people to be effective and efficient, but also be as nimble and lean as you can.
HL: What are the biggest challenges hospital CFOs are facing right now? And how can we solve them?
Michael Sunday Jr., CFO, Pardee UNC Health Care: Today, hospitals are facing multiple issues in the healthcare industry, including the rising cost of labor, a labor shortage, rising costs of supplies due to inflation, pandemic spikes, and reductions to Medicare and Medicaid reimbursements. To take on these challenges, we are first looking at ways to not rely on contract labor. That could mean creating a hospital contract labor pool to reduce the impact of contract labor. Other steps would include hiring in-house recruiters to help bring qualified employees into the organization and finding ways to reduce costs, including the reduction of waste and energy consumption. Charge capture is also important to ensure all documentation is being captured on the front end to reduce the likelihood of denials from insurance companies.
Javier Vallejo, CFO, Prism Health North Texas: The pipeline is short. You read about the great resignation and a lot of it's been in the healthcare space. There's been a lot of good leaders who have retired probably a little earlier than planned. I think it's about the next generation having all the skills and having the know how to pull those pieces together. It's about being able to give avenues so that the healthcare system does not have a breach, and good financial management, good doctors, and good nurses. One of the main struggles right now in the entire healthcare system space is just a lack of bench strength, a lack of succession planning. We need to be grooming the next generation of leaders.
Sherron Rogers, CFO,Johns Hopkins All Children's Hospital: Healthcare is changing rapidly, and we are challenged to keep up with the pace of change. It's important to continue to provide the most meaningful services to our patients, to the community, and to expand the services that we provide. Like everyone else, we're facing challenges in continuing to recruit and retain the workforce. We have a wonderful organization that is mission-driven and is a place where people want to work. But that's not the end of the story. People need to feel their work is valued and they can do that in our organization. And we need to continue to make sure we're providing those meaningful experiences for our members because they are the ones giving to our patients. We are hiring in all areas of the health system, but like others, we're trying to make sure we're recruiting in nursing and respiratory therapy, specifically.
HL: What are some of the innovative ideas you are bringing to the table?
Javier Vallejo, CFO, Prism Health North Texas: I'm focusing on quality and value and trying to align the financial aspects of healthcare with the delivery of care. Healthcare, in general, is known as a loss leader—you can't make any money at healthcare. Time and time again, if you look at the business cycles, the facilities that are doing something right, the facilities that are working towards the future, they are finding ways to bridge that gap and bring those two concepts together.
HL: What is your goal for not only the financial well-being of the organization but also to continue providing high-quality care to patients?
John Pohlman, CFO, SVP Finance, Mount Sinai South Nassau: Looking at an income statement every year, my goal is usually a 3% operating margin. We have top-line revenue of about $700 million. So, a 3% operating margin would be a surplus of around $20 million. With that surplus of $20 million, we can reinvest back into the organization. There are multiple buckets or silos that I think of when I talk about reinvestment. One is around capital and technology. We want to make sure that we're replacing our radiology equipment, MRI, CT scanners, and all the equipment in the operating rooms that support our surgeons and allow them to take care of patients. We want to make sure that we have the latest technology because that's going to provide the highest quality of care to our patients.
That's one reason why we need that operating surplus. The other reason is we want to reinvest in our staff and our employees. We want to continue to give wage increases and make market adjustments when necessary. Investing on the capital side and on the labor side certainly drives higher quality and patient satisfaction. That's always my goal from a financial perspective. We need to operate on the surplus side so we can continue to reinvest in the organization to support the communities that we serve and provide them with that high-quality care.
CEO Fred Manchur announced he’ll be retiring after 12 years in the position.
Michael Mewhirter, the chief financial officer for Kettering Health, has taken over leading the entire organization as interim Chief Executive Officer. Mewhirter is stepping into the role following current CEO Fred Manchur’s announcement that he will be retiring after 12 years in the position.
"The Kettering Health board is highly confident that Michael has the qualifications to ensure Kettering Health’s success until a permanent CEO is named," Dave Weigley, chairman of the Kettering Health board, said in a release. "Kettering Health is blessed with an incredible team of physicians, caregivers, and support staff. Because of this, I believe we are extremely well-positioned to continue to deliver on our mission to improve the quality of life of the people in the communities we serve. In appointing Michael, we believe we have found a dynamic and experienced interim leader to champion this sacred calling."
Mewhirter has been with Kettering Health—an Ohio-based healthcare network with 403 total staffed beds and over $3 billion in total patient revenue—for almost eight years, according to LinkedIn.
"It is an honor for me to take the interim post and guide an organization that I care deeply about through our next chapter in service to our communities," Mewhirter said in the release. "I’m particularly excited about leading the great people in our system as they strive to provide high-quality, innovative care delivered with compassion and respect for every patient and family member. Kettering Health is an incredible organization, and I thank the board and our leadership for the trust they’ve put in me."
The Kettering Health board has established a search committee to identify the organization’s next chief executive officer.
Some healthcare providers have closed their maternity care wards due to rising costs and declining profits.
Maternity care at U.S. hospitals is becoming a rare commodity as more healthcare provider shutter these services due to declining birth rates, lack of staff, the costs associated with running these departments, and pandemic-related issues.
Over 40% of births in the U.S. are covered by Medicaid, yet the program is slow to provide reimbursements, adding fuel to hospitals’ decision to close maternity wards, according to a report from Vox. Additionally, it can cost hospitals between $1,189 and $11,986 per maternity stay, according to expert research on the topic. Between 2006 and 2020 more than 400 maternity wards across the country closed, according to a PBS report.
However, there are still 2,700 hospitals across the U.S. that are providing maternity services, and some are better equipped to do so than others.
U.S. News & World Report has released its first-ever research paper on the best hospitals for maternity care. To come up with this list the organization analyzed how well hospitals perform in childbirth using C-section rates, newborn complication rates, breast milk feeding rates, early elective delivery rates, routine vaginal birth after cesarean delivery rates, and episiotomy rates. U.S. News also examined if a hospital meets the federal criteria for "birthing-friendly" practices.
"All families deserve to be informed on how hospitals perform," Ben Harder, managing editor and chief of health analysis at U.S. News & World Report, told USA Today. "Our hope is that this initiative will push hospitals in general—and especially underperforming hospitals—to redouble their efforts to provide the same high-quality care."
The following list includes the 10 of the top U.S. hospitals for maternity care according to U.S. News & World Report:
Andrew Zukowski is taking over for retiring CFO David Hughes.
ECU Health—a not-for-profit, 1,447-bed hospital system based in North Carolina—has appointed a new chief financial officer.
Andrew Zukowski assumed the position on November 28, 2022, following an extensive search. Before joining ECU, Zukowski served as UNC Rex Healthcare’s chief financial officer since 2016. Zukowski’s arrival at ECU Health comes in succession of current CFO David Hughes’ planned retirement on Dec. 30 after serving the organization and eastern North Carolina for 25 years.
"This is an exciting time for me personally and professionally," Zukowski said in a release. "ECU Health and the Brody School of Medicine are both synonymous with rural academic and clinical excellence. I look forward to joining the leadership team at ECU Health to advance the important mission-driven work positively impacting the lives of the 1.4 million people who call eastern North Carolina home."
Current CFO Steve Oglesby is retiring after three decades with the organization.
Baptist Health—the largest health system in Kentucky with almost 500 total staffed beds and over $3 billion in total patient revenue—has announced that healthcare finance industry veteran Rick Carrico will take over as CFO for the retiring Steve Oglesby.
Oglesby is stepping down following 30 years of service at Baptist Health. Currently, Carrico is the CFO for WakeMed Health and Hospitals in Raleigh, North Carolina where he is responsible for finance, including planning, analytics, information systems technology, revenue cycle, managed care contracting, and strategic business planning.
"I am honored to join the Baptist Health team as chief financial officer," Carrico said in a release announcing his new position. "It is exciting to return to Kentucky, where I was born and raised, and my healthcare career began. Given the challenges of today’s healthcare industry, I look forward to furthering Baptist Health’s mission to provide high-quality care and improve the health of the Kentucky and southern Indiana communities they serve."
Previously, Carrico served as vice president and CFO of the Greater Hudson Valley Health System in Middletown, New York from 2014 to 2017. From 2011 to 2014, he was the executive vice president and CFO of Springstone LLC, in Louisville, a developer, and operator of a national network of behavioral health hospitals.
"Rick Carrico has the background that we were looking for—experience with bond rating agencies, strategy development, investment management, treasury, the workings of a complex healthcare organization, and the desire to take on a new challenge," Gerard Colman, Baptist Health CEO said in the release. "He will be joining us as Baptist Health expands access to our healthcare facilities and continues to execute our key strategies while strengthening our financial position."
Education on hospital cost structure will be a valuable tool in 2023.
Healthcare organizations have been confronting a series of financial challenges that have forced some hospitals to shut their doors, while others have been able to weather the storm, thanks to strong leadership and innovative solutions.
Cheryl Sadro, the CFO for UC Davis Health—a California-based health system with 646 acute-care beds and an annual budget of roughly $1.7 billion—recently connected with HealthLeaders to discuss the financial issues hospitals and health systems have been dealing with over the course of the pandemic, improving relationships with payers, and some of the key areas organizations should be focusing their monetary resources. Sadro was joined by Tammy Trovatten, the director of government reimbursement at UC Davis Health.
HealthLeaders: How has COVID-19 impacted UC Davis Health?
Cheryl Sadro: COVID was good to us, I guess from a perspective of reimbursement and supplemental payments that we received. We made budget during COVID, which was not necessarily the case with a lot of health systems. As we begin to come out of the pandemic, several things have been tough—the stock market portfolio is certainly one big piece. A lot of folks are suffering with volume, and certainly, many organizations, not necessarily UC Davis, are suffering with staffing challenges. Our nursing staffing has been stable, so that's not been a big issue for us. We did have, as most people across the country did, some drop in OR cases.
HL: What major challenges do you see coming down the pike?
Sadro: From a payer perspective, we're about to see a year or so of tough negotiations. We're going to continue to see the payers be a little bit tougher. It'd be great if we could find a way to go to Medicare and Medicaid and have them take a little bit more of the costs. The other piece of the payer issue is the denying of claims and pushing cash flow out.
HL: What solutions exist to the challenges we've discussed and have you been utilizing them at UC Davis?
Sadro: We're a high-specialty, high-acuity organization. We've had to go outside the regular pool of anesthesiologists that are on faculty because it took a little bit longer to recruit them—that's just how it works in academic medicine. We have gone to some external parties temporarily, in terms of finding anesthesia coverage.
About a year ago, UC Davis developed a robust fund flow document and process that's meant to compensate the faculty and their departments without having to do a lot of one-off type of agreements. In academia, it's common for folks to go to either the health system or the CEO and ask for things as they occur. We have a fund flow document that we can develop that covers all kinds of things—physician compensation, projects, and a lot of different things that the department would be coming in asking for, on a case-by-case basis. So that puts a lot of predictability in your expense structure.
HL: How might the results of the mid-term elections impact health systems’ financial stability?
Sadro: One of the things we've been watching and will continue to watch through this process is where we go from here with 340B. We're the only level one trauma center in a multicounty area, and between 340B trauma and transplant, we've garnered a large portion of our bottom line. As we think about changes in policy and things of that nature, we are paying attention to policy and how it impacts us long term. 340B going away would not only be devastating for us but incredibly devastating to our patients because it does fund some other things that we can do in our organization to serve that indigent population.
Tammy Trovatten: It's been this ongoing saga for many years. CMS implemented a cut to 340B hospitals, which just recently got overturned, but we still are unsure how that's going to be reimbursed because it's trying to be made budget neutral. It doesn't matter who's in charge, this is just an overall problem that is concerning. All non-340B hospitals got an average wholesale cost plus 6%, where we were cut to an average wholesale price minus 22%. So, it was a weird thing that happened that got overturned, but we [are unsure] where we go in the future.
HL: What are some key areas that hospitals should be focusing their financial resources on as we head into 2023?
Sadro: We need to focus some resources on educating … about our cost structure. Somebody said to me recently, 'People were so excited about the healthcare system during COVID and what we did for them and now they've kind of forgotten about it because now we're back to conversations about how expensive we are.' There's no doubt that healthcare is expensive. But by the same token, the majority of the people that are providing healthcare are trying to do a good job at keeping costs down. So, I think educating the public about that, so it doesn't get out of hand is valuable.
We could also look into developing partnerships and affiliations and things of that nature that will help add to that traditional revenue stream and allow us to be a little bit more self-sufficient. So, maybe working with venture capitalists is an opportunity in some investment lines. That can shore us up and add revenue, where we might see REITs taking revenue away from us.
HL: What do you think the biggest challenge of 2023 will be?
Trovatten: We're still under the pandemic in the emergency waivers, but I don't think that's going to last long into the calendar year 2023. I know it's got until the end of April, but I can't see going past that. Right now, because of the pandemic, we're getting reimbursed for telemedicine visits, which makes it easier for patients to get that care where they needed it, and it is less expensive. But to get reimbursed for that is going to be a challenge after the waiver goes away. And there are some other cuts that will probably be coming in next year, reimbursement-wise that's going to make things a little tougher.
S&P Global Ratings doesn’t expect margin pressures to ease much next year.
S&P Global Ratings has revised its view of the U.S. not-for-profit health sector to "negative" as a result of continuing operating pressures and volatility in the investment market.
"Margins and cash flow recently have at best demonstrated limited sustainability of a post-pandemic recovery and at worst have accelerated to uncharacteristically high losses," S&P Global Ratings credit analyst Suzie Desai, said in an email release. "We do not expect full margin recovery in 2023 and will likely see continued operating losses, albeit at lower levels than 2022, for many institutions. Meaningful improvement will likely take multiple years."
Hospitals and health systems across the U.S. are expected to finish the year in the red as labor and expense challenges persist. In October, organizations saw a tenth consecutive month of hospital operating margin declines, according to a Syntellis report around hospitals' financial benchmarks. Recent Kaufman Hall data aligns with the Syntellis report.
"Heading into the final quarter of the year, hospitals and physician practices have had little reprieve during a very difficult 2022 from a financial perspective," Erik Swanson, a senior vice president of data and analytics with Kaufman Hall, said in a separate email statement. "Hospitals and physician practices could climb back into the black by the end of the year, but it is looking less and less likely as months of negative margins continue to pile up."
Financial terms of the deal were not disclosed, however, to close the acquisition, the Centurion Foundation will establish CCHP as a 501(c)(3) organization.
Prospect Medical Holdings—an independent physician association—and the Centurion Foundation—a Georgia-based 501(c)(3) nonprofit dedicated to providing facilities for healthcare systems—have come to an agreement in which Centurion will acquire CharterCARE Health Partners—a Rhode Island-based health system—from Prospect for an undisclosed amount.
The asset purchase agreement also includes CharterCARE’s related businesses, real estate assets, physician clinic operations, and outpatient services. The deal is subject to customary regulatory approvals, including reviews by the Rhode Island Department of Health and the Rhode Island Attorney General.
"CharterCARE is excited at the potential of this proposed acquisition, which allows us to build on Prospect’s significant investment in Rhode Island healthcare," Jeffrey Liebman, CharterCARE CEO, said in a release announcing the deal. "The combination of a strong capital partner with an experienced operator of hospitals and the return to nonprofit status is very attractive. We look forward to filing our application with the Department of Health and Attorney General and working with regulators through the review process."
Centurion will make CharterCARE Health of Rhode Island a 501(c)(3) organization in order to acquire it from Prospect. If the deal closes, the system will become a nonprofit health system with the goal of increasing healthcare access and lowering the cost of services for the local community. Centurion of Rhode Island will maintain local leadership and will have a Board of Directors that includes local community leaders in the healthcare field.
"Centurion was created for this exact purpose, to partner alongside providers and communities in creating equitable and cost-effective solutions," Ben Mingle, Centurion Foundation President, said in the release. "We believe strongly in the mission of CharterCARE and look forward to the opportunity of engaging in a long-term relationship with the community."