PROVIDENCE – Care New England Health System reported a $26.5 million net loss in the third quarter ending on June 30, as the hospital system continues to fight the effects of the COVID-19 pandemic.
The net loss included an operating income of $3.5 million that was offset by non-operating losses of $30 million. The $3.5 million in operating income was the first three-month period that did not result in a loss from CNE business operations since the second quarter of 2021, when the hospital system posted an operating income of $10.8 million for the quarter.
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But the positive operating income as of June 30 was largely due to a one-time $7.8 million sale of several Jewelry District properties, including 300 Richmond Street, 261 Richmond St., 200 Chestnut St. and 70 Elm St., according to financial statements made public on a municipal bond website in August. The state’s second-largest hospital system also cited improvements in patient volume as one of the reasons for the operating income, with the number of patients at CNE facilities returning to pre-COVID-19 levels, the financial report states.
Both CNE and Lifespan Corp., the state’s largest hospital group, are not-for-profit corporations that have fiscal years that run from Oct. 1 to Sept. 30.
“The COVID-19 pandemic significantly impacted CNE’s operational and financial performance, starting in March 2020 and continuing through fiscal year 2022,” the third-quarter report states. “The current resurgence [of COVID-19] has steadily declined, and financial metrics have steadily improved since the end of the second quarter of FY 2022.”
By comparison, Lifespan posted a net loss of $49 million for its third quarter after factoring in investment losses, liabilities and asset devaluation. Lifespan had an operating income of $2.7 million for the quarter, according to a presentation for investors released by Lifespan on Sept. 15, but the health system’s net loss over nine months ending June 30 was $142 million.
CNE’s net losses for the nine-month period ending June 30 were $71.2 million, including non-operating losses, such as negative investment returns, which totaled $39.6 million. This was on top of a $31.6 million operating loss over the nine months. By comparison, Lifespan’s operating loss for the same nine-month period was $69.5 million.
“It’s getting better every month, but we’re not where we want to be yet,” said Gail Robbins, senior vice president for planning and finance at CNE. “Everybody is struggling post-COVID to get back to a stable financial situation.”
The financial state of CNE and Lifespan has been under scrutiny since both – rocked by the pandemic – worked for months on a plan to merge and create a new health system in partnership with Brown University. Attorney General Peter F. Neronha rejected the merger proposal in February in part because of concerns over stifling competition in the state.
Since then, Care New England’s CEO and President Dr. James E. Fanale has said he will retire in early 2023. And while other suitors expressed interest in CNE, its board of directors decided in July to remain independent and turn down all offers to either merge or be acquired.
That vote came on July 5, just days after CNE closed the books on its third quarter.
The CNE financial report says total revenue for the third quarter was $313 million, up from $300 million in the second quarter and $297 million in the first quarter. An increase in Federal Emergency Management Agency grant revenues, Integra Community Care Network shared savings and at-risk arrangements revenue and retail pharmacy revenue were some of the sources that boosted the income during the quarter, CNE said.
In addition to higher revenue, the hospital system reported fewer expenses than in the previous two quarters in fiscal 2022, with total expenses of $310 million compared with $315 million in the second quarter and $318 million in the first quarter. Some of the categories with lower expenses included salaries, insurance expenses and research expenses.
“CNE’s actions [plan] addresses many issues, specifically reducing reliance on high-cost premium labor, improving patient access and experience, and maximizing operational efficiencies,” said Care New England spokesperson Raina Smith.
The hospital system did not escape the rising costs that have plagued other businesses. CNE reported that expenses for medical supplies and drugs were $2.2 million higher compared with the same quarter in 2021 “due to an increase in drug costs, and a volume related increase in specialty pharmacy drug costs.”
“The greatest challenge affecting CNE’s financial performance through the third quarter of FY 2022 was the impact of COVID-19 on the overall cost structure of the entire organization,” the financial report states.
Indeed. While CNE posted a $31.6 million loss in the first nine months of fiscal 2022, the same period in 2021 showed a gain of $41.3 million. But the 2021 numbers included $77.5 million in COVID-19 stimulus grants, while CNE received only $10.1 million between October 2021 and March 2022. The hospital system received no relief funding in the third quarter of 2022 but an additional $11 million in American Rescue Plan Act funds for CNE was included in the fiscal 2023 Rhode Island state budget, which was approved in June.
