PROVIDENCE – Lifespan Corp. has started the fiscal year strong reporting a $55.4 million operating income for the first quarter of 2024 ending on Dec. 31, compared with a $3.4 million operating loss for the same period last year.
This comes as Lifespan continues to improve after closing out fiscal year 2023 with an $8.6 million operating income, which was up from the health system's $56 million operating loss a year prior. The state's largest health system's net income rose to $93.1 million during the most recent quarter, compared with $15.3 million during the same period last year.
While these figures show a dramatic improvement, this was largely the result of $58 million in out-of-period and one-time, or unusual, items, according to an unaudited financial report released Thursday.
These unusual items included:
- $27.8 million in Federal Emergency Management Agency funds, compared with $6.5 million received last year.
- $34.8 million within patient service revenue related to the final 340(b) settlement, which the Centers for Medicare & Medicaid Services issued a ruling for on Nov. 2, including an overview of a remedy process. In an effort to keep budget neutrality, CMS plans to reduce future non-drug and service payments by 0.5% beginning in calendar year 2026 and it will end around 16 months once full offset happens.
- $9.8 million related to a change in the Disproportionate Share model that affected the prior year. In December, CMS approved Rhode Island’s submission for Medicaid-managed state-directed payments, which were retroactive to July 1, 2023.
- Other changes in management’s estimates of unusual items resulted in the recognition of $14.4 million in operating losses.
If these items were excluded, Lifespan would have reported a $2.6 million operating loss for the quarter, as compared with a $9.9 million loss – excluding one-item revenue items – in the same period last year, according to the report.
“While we are pleased to have realized $55.4M in operating income in the first quarter of FY2024, this figure reflects non-recurring benefits including FEMA reimbursement and a 340B settlement award, without which we would have reported a $2.6M operating loss," Lifespan spokesperson Kathleen Hart said in an email. "We remained focused on improving our operating performance which was better than last year’s comparable quarter."
Patient service revenue increased by 21% to $764.7 million in the most recent quarter from $632.6 million in the same quarter last year. However, excluding the unusual items, patient service revenue would have increased by $66.3 million, or 10.6%.
Discharges increased by 7.2% year over year in the quarter, adding $37.6 million in patient service revenue while changes in payor mix and rates led to a net increase of $12.6 million.
Total operating expenses increased by 14% to $868.4 million in the quarter from $761.1 million in the same quarter last year. Lifespan executives attributed this to increased spending on compensation and benefits, supplies and other expenses, as well as license fees.
Lifespan’s spending on compensation and benefits increased from $465.2 million in the 2023 first quarter to just under $500 million in the most recent quarter. The rise in compensation and benefits was driven by adding 462 full-time equivalent positions, which added $13.8 million in expenses. Contract labor full-time equivalent positions remained stable while contracted costs fell by $5.1 million due to lower average rates paid during the quarter compared with last year.
Costs related to supplies and other expenses rose to $234.2 million from $197.7 million year over year. The increase was partly due to an $8.5 million rise in drug costs associated with Lifespan Retail and Contract Pharmacies. All other costs related to medical and surgical supplies increased by $28 million, partly due to general inflation and a 6.2% rise in surgical volume, according to the report.
Lifespan’s licensing fees more than doubled to $62.6 million from $25.7 million in the quarter year over year.
Nonoperating gains rose to $37.7 million for the quarter, up from $18.8 million in the same quarter last year. This is largely due to Lifespan’s investment income, including gains on board-designated investments, rising to $43.5 million from $23.7 million year over year.
Lifespan’s total net assets rose by $128.1 million in the quarter, compared with a $42.6 million rise in the same quarter last year. Driving this increase was a considerable boost in Lifespan’s operating income, though gains were offset by net assets released from restrictions falling from a $48.2 million loss in the 2023 first quarter to a $75.7 million loss in the most recent quarter.
Cash and cash equivalents were $123 million in the most recent quarter, compared with $141.8 million in the same period last year and $96.7 million at the end of fiscal year 2023. The rise in cash and cash equivalents between the 2023 fourth quarter and the 2024 first quarter was primarily due to $23 million in FEMA funds that Lifespan received.
Other receivables rose to $186.9 million from $76.2 million in the quarter year over year, which was mainly driven by the receivables related to the Medicaid-directed payments and Pharmacy 340(b) settlement.
The increase in license fees contributed to Lifespan’s accrued expenses rising to $74.1 million, which is up from $33.6 million in the 2023 first quarter.
Overall, Lifespan’s volume levels remained stable in the quarter year over year. But some notable changes included a 7.5% increase in the number of patients discharged, as well as a 5.5% increase in clinic visits and a 6.5% rise in emergency department visits. Also, provider vacancies drove care office visits to decline by 12.6%.
(UPDATE adds the sixth paragraph with comment from Lifespan spokesperson Kathleen Hart.)
Katie Castellani is a PBN staff writer. You may contact her at Castellani@PBN.com.