December 8, 2017

UMass Memorial Health Care makes $10M profit in 2017

Grant Welker
The emergency room at UMass Memorial Medical Center's university campus in Worcester. The hospital's parent was profitable for a fourth straight year.

Worcester-based UMass Memorial Health Care was profitable for a fourth straight year for the just-completed budget period, but less so than the three previous years, system officials said Friday.

The healthcare system made a $10-million operating profit on $2.4 billion in revenue, according to its annual financial report. Although revenue rose by 3.1 percent, expenses climbed even higher, by 4.4 percent, particularly for salaries and benefits.

Last year, the healthcare system made $40-million in operating profit.

Revenue was relatively hurt in part by capacity reductions during renovations at UMass Memorial's University and Memorial hospital campuses in Worcester, CFO Sergio Melgar said.

The health care system is roughly halfway through a $200-million capital renovation initiative that has added more single-bed rooms to the university and memorial campuses, and a $37-million expansion of the emergency department at UMass Memorial-HealthAlliance Hospital in Leominster.

That work has led to some drops in capacity, which has caused UMass Memorial Health Care to miss out on some patients or transfers. An estimate of those potential losses are 30 to 90 patients a month, Melgar said. That equates to roughly $600,000 to $1.8 million in lost revenue each month.

A new phase of capital work is expected to get underway next year. The system is borrowing $90 million this month for that work. The tax-exempt bond is being completed ahead of schedule in case a new tax bill working its way through Congress affects the sale of such bonds, Melgar said.

The recently completed budget year, which began Oct. 1, 2016, included a rollout of the healthcare system's $650-million technology infrastructure upgrade. The system, known as Epic, went live on-time and on-budget, Melgar said.

A tightening financial situation at UMass Memorial Health Care is not anticipated to lead to layoffs, Melgar said. But costs have risen, and the healthcare system can't raise rates accordingly, he added.

"You have to become more efficient," Melgar said.

For the recently-completed 2017 budget year, UMass Memorial Health Care had a $74 million increase in revenue, but a $104-million rise in expenses. A sharp rise in investment income, which rose by $21 million to reach nearly $48 million, helped the healthcare system hit $63 million in profit when factoring in non-operating revenue.

Liablities, which includes compensation and debt, rose slightly by 1 percent to $577 million.

For the 2016 budget year, UMass Memorial Health Care made a $40-million operating profit, with roughly two-thirds of that coming from UMass Memorial Medical Center. The profit margin was 2.8 percent, according to the state's Center for Health Information and Analysis.

Among hospitals that UMass Memorial Health Care owns, HealthAlliance Hospital made an $8.2-million profit, Marlborough Hospital an $8.1-million profit, and Clinton Hospital a $2.3-million loss.

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