PROVIDENCE – Costly temporary staffing caused by a three-month strike at Butler Hospital negatively impacted Care New England Health System’s third-quarter earnings.
The health system reported a $4.4 million operating loss in the third quarter fiscal year 2025 ending June 30, according to unaudited financial statements released Aug. 14. This is a dramatic fall from the $2.7 million operating gain the health system reported in the third quarter 2024.
Management noted the health system had eight consecutive quarters in the black. The most recent quarter’s performance is the result of “greater than budgeted temporary staffing expenses” incurred at Butler Hospital as a result of unsuccessful contract negotiations with unionized workers that led to a labor strike that began May 15.
The months-long strike came to an end Monday night after union workers and Butler management announced they had ratified a new four-year contract.
Net income for the quarter was $12.4 million, a drastic increase over the $3.96 million reported in the same period last year. Driving this was a $16.6 million change in net unrealized gains reported in the most recent period, compared with a $5 million change in net unrealized losses reported in the third quarter 2024. Also, net non-operating gains rose from $1.2 million last year, to $16.8 million in the most recent period.
Operating revenues ticked up to $402 million compared to $359.7 million the year prior. Operating expenses rose to from $356.9 million to $359.7 million.
Revenue was boosted by net patient service revenues, which reached $325.2 million during the quarter, up from $300.5 million last year. Also, other revenue rose to $66.7 million compared with last year’s $47.4 million.
Meanwhile, the rising expenses were driven by increasing costs for salaries and wages as well as medical supplies and drugs
Care New England spent $194.9 million on salaries and wages during the quarter, compared with the $153.9 million reported in the same period last year. Also, spending on medical supplies and drugs rose to $51.5 million, up from last year’s $41.7 million.
However, spending on purchased services dropped for the first time in several quarters. The health system spent $33.1 million on purchased services during the most recent quarter, a 15% drop from last year’s $38.8 million.
Care New England’s total assets through the quarter were $1.08 billion, a slight increase over last year’s $1.06 billion.
Cash and cash equivalents fell to $32.1 million compared with last year’s $55.1 million. Also, short-term investments dropped to $2.4 million, down from $35.6 million in the same period last year.
Patient accounts receivable was $151.2 million, compared with $122.3 million last year. Other receivables rose to $49.1 million, up from last year’s $44.2 million. Management said other receivables changes based on the timing of the receipts from the State of Rhode Island Medicaid License Fee Program.
Prepaid expenses fell from last year’s $19.4 million to $15.5 million. Also, endowment funds dropped about 19% from last year’s $79.5 million to $64.3 million. Board-designated funds rose about 20% to $182.8 million, up from last year’s $151.9 million.
Property, plant and equipment also rose to $275.9 million, about a 25% increase over last year’s $220 million. Management says about $35.6 million of its fixed assets comes from the health system’s implementation of Epic, an electronic health record system Care New England says will go live at their locations on Oct. 4.
Days cash on hand through the quarter fell to 44.4 days, compared with 49.5 days during the same period last year. The health system also says it is monitoring its capital spending and $52.1 million has been spent through the third quarter this year, mainly related to information technology, medical equipment and facilities upgrades and renovations.
In March, Women and infants Hospital opened a new labor and delivery unit that cost about $40 million, with $35 million coming from donors.
Despite the financial challenges posed by the strike, Care New England’s management attributed its earnings to initiatives implemented in 2023. These include actions to boost revenue growth and revenue cycle management – like reducing denials, prior authorization and charge capture improvements – volume growth, supply chain and a lower corporate overhead structure.
A spokesperson for Care New England was not immediately available Tuesday to comment on the financial report.
Katie Castellani is a PBN staff writer. You may contact her at Castellani@PBN.com.
