PROVIDENCE – The state’s largest hospital system operators are losing money again, with combined operating losses of more than $100 million for the fiscal year that ended Sept. 30.
Lifespan Corp. and Care New England Health System have long suffered financial woes, worsened by the pandemic. COVID-19 remains a shadow hovering over their latest financial reports, which combined with higher staffing and supply costs left each hospital system in the red.
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Lifespan, which owns Rhode Island, Miriam, Bradley and Newport hospitals, lost $77 million in operating revenue in fiscal year 2022, which ended Sept. 30. Interim CEO and President Arthur Sampson in a statement blamed the financial losses on inflationary price hikes as well as “unfavorable” patient volume, which came in 9.2% below budget forecasts.
Including operating and investment declines, Lifespan’s net loss amounted to $187.6 million for the year that ended Sept. 30, a stark contrast to fiscal year 2021 when Lifespan ended in the black with an $89 million operating profit.
“The cost of hospital operations – like everything else hit by inflation – has increased significantly which has further exasperated an already challenging healthcare environment,” Sampson said in a statement. “We have received some financial assistance from the state and federal governments, which we are grateful for, but it’s not enough to offset lost revenue and increased expenses. These challenges are not unique to Lifespan; nearly every healthcare organization across the country is in a similar situation.”
Lifespan’s annual operating expenses rose 6.2% year-over-year to $2.9 billion, driven by a $139.5 million increase to compensation and benefits, alongside a $15.8 million hike to supplies and other expenses, according to financial statements.
While revenue from patient services rose 5.6% to $2.4 billion, other revenues were slashed by nearly 25%, to $264.1 million. This reflected lower federal aid, both through the CARES Act as well as American Rescue Plan Act funds. The company also received $11.3 million in revenue in fiscal 2021 for operating a COVID-19 field hospital at the R.I. Convention Center, but did not receive similar payments in 2022 because the field hospital has been shut down.
Care New England, which owns Women & Infants, Kent and Butler hospitals, posted a $34.2 million loss for the fiscal year 2022. By comparison, CNE ended fiscal year 2021 with a $16.1 million profit, boosted in part by $77.5 million in federal and state stimulus grants. The company allotted another $24.5 million in federal COVID-19 aid to its fiscal 2022 balance sheet, but was still unable to overcome skyrocketing staffing and supply costs, ushered in by a “third wave” of COVID in 2021, the company stated.
Indeed, staff salaries and benefits were the largest operating cost, at $742.8 million, followed by the $382.2 million spent on “supplies and other expenses.” Total expenses of $1.3 billion marked a 2.6% rise year-over-year.
One bright spot: “other revenue” was up 3.2% year-over-year, thanks to the $7.8 million sale of several Jewelry District properties which closed in June. Net revenue from patient services also rose 3% to $1.0 billion, thanks in part to longer patient hospital stays during COVID-19 surges and demand for outpatient services like diagnostic imaging and laboratory services, the company stated.
Combined with declining investments, Care New England’s total net loss amounted to $87.4 million, compared to a $50.3 million profit in fiscal 2021.
Both Lifespan and Care New England are also in the midst of leadership transitions due to the departures of their respective CEOs. Care New England’s newly named president and CEO, Dr. Michael Wagner, took up the helm earlier this month, following the retirement of Dr. James Fanale. Meanwhile, Lifespan has named John Fernandez, current president of Mass Eye and Ear and Mass General Brigham Integrated Care, as its next leader, filling the spot left after former President and CEO Timothy J. Babineau abruptly resigned earlier this year. Fernandez doesn’t start until early next year; Sampson has been serving in the role on an interim basis since Babineau left.
With a proposed merger off the table, killed by federal and state regulators, each hospital group has looked for alternative ways to replenish their coffers. At Lifespan, that plan includes closing down an East Side outpatient surgery center next month.
The company’s Rhode Island Hospital Surgery Center in Wayland Square will shut down Jan. 31, company spokeswoman Kathleen Hart confirmed in an email on Thursday. Hart said the decision to close the Seekonk Street facility, which offers outpatient and ambulatory surgery services, is aimed at consolidating surgical care. Services being offered out of the East Side facility will move to Rhode Island Hospital, and the 20 employees who work in Wayland Square will have the option to transfer elsewhere within the company or else receive a severance package, according to Hart.
“Lifespan leadership is committed to a strong and well thought out recovery plan, which will help position us more favorably into FY 2023, which began on October 1, 2022,” Sampson said in a statement.
Nancy Lavin is a PBN staff writer. You may reach her at Lavin@PBN.com.
