Care New England shows revenue growth, but reports $33.7M operating loss

CARE NEW ENGLAND reported an operating loss of $33.7 million in the first quarter of fiscal 2018, noting Memorial Hospital's closure was a major factor in the loss.
CARE NEW ENGLAND reported an operating loss of $33.7 million in the first quarter of fiscal 2018, noting Memorial Hospital's closure was a major factor in the loss.

PROVIDENCE – Care New England released its FY 2018 first quarter report Thursday, showing an operating loss of $33.7 million and a loss of $57 million after including nonoperating gains and losses. However, after a series of adjustments, some of them one-time items, the hospital group showed a decrease in unrestricted net assets for the three months ended Dec. 31 of $33.5 million. After further one-time adjustments, Care New England posted an adjusted net loss from operations of $8.2 million.

“Today’s FY 2018 Q1 report released by Care New England represents a continuing trend of operational and financial improvements as reported in both Q3 and Q4 of FY 2017,” said Jim Beardsworth, CNE spokesman.

The nonprofit recorded $278.2 million in revenue for the first quarter of fiscal 2018, a 1.3 percent year-over-year increase.

The health care provider noted that much of the loss was attributable to the closure of Memorial Hospital of Rhode Island in December 2017, with a $22.4 million asset impairment charge taken against the value of Memorial Hospital.

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With the exclusion of Memorial Hospital and its affiliates from what Care New England named the Obligated Group (as of Dec. 22, 2017), Beardsworth said, the system’s operating loss for the first quarter of fiscal 2018 was $8.7 million, of which Memorial Hospital, at $8.5 million, accounted for nearly 98 percent.

CNE adopted accounting rule changes for fiscal 2018 that eliminate the impact to operating results for pension costs and settlement accounting for pension plans, and implemented additional de-risking strategies for the CNE and MHRI defined-benefit pension plans. The result was both a pension settlement loss of $29.5 million and a pension adjustment gain of $23.3 million.

The first strategy included a Bulk Lump Sum offer to 1,800 term-vested plan participants in both the CNE and MHRI defined-benefit plans, which more than 800 participants elected to take a lump sum payment, resulting in $52 million of payments made in either cash or rollover election. The resulting projected benefit obligations for the two defined-benefit pension plans decreased by $47.7 million.

The second strategy was the election of contract discontinuance of the John Hancock annuity for the MHRI plan. As a result, future capital calls for the plan are eliminated and a one-time market value true-up from John Hancock occurred. During the first quarter, $10.4 million and $19.1 million respectively for CNE and Memorial plans were recorded as non-operating settlement charges. In addition, as a result the re-measurement of the assests for both plans an additional $6.2 million was recorded as an adjustment to the pension liability.

“CNE leadership continues to work aggressively to implement rigorous action plans focusing on growth initiatives, patient access and care retention efforts. While it is clear by today’s filing that significant progress is being made, much more work remains. CNE leadership is confident it will continue to build upon its progress moving forward,” Beardsworth said.

Rob Borkowski is PBN staff writer.