Dive Brief:
- Advocate Health’s financial performance dipped in the third quarter despite rising patient volumes as the major nonprofit health system navigated higher expenses and declining investment returns.
- The operator reported a nine-month operating income of $79.4 million, down from the $85.7 million Advocate recorded through the first half of the year.
- Advocate’s investment income also took a hit, falling more than a third from midyear. Overall, the nonprofit’s bottom line dropped to $721.2 million, 28% lower than midyear.
Dive Insight:
Advocate Health, one of the biggest nonprofits in the U.S., is in the back half of its first operating year as a combined system.
Formed out of a merger between Illinois-based Advocate Aurora Health and North Carolina-based Atrium Health last year, the health system is comprised of three divisions: Advocate Aurora Health, Atrium Health’s Charlotte-Mecklenburg Hospital Authority and Atrium Health Wake Forest Baptist. Together, the divisions operate more than a thousand care sites, including 67 hospitals.
Each division reported year-over-year revenue increases due to patient demand for services. Across the board, the divisions experienced higher patient volumes — particularly for surgeries and outpatient visits — though patient days slipped slightly for the system overall.
In the first nine months of 2023 compared with the same period in 2022, Advocate Aurora Health experienced a 5.3% increase in outpatient visits and a 5.6% increase in physician visits. Patient visits increased by 9.1% and surgical procedures increased by 9.2% at the Charlotte-Mecklenburg Hospital Authority. Inpatient admissions and outpatient visits also increased by 9.5% and 7.6%, respectively, at Wake Forest Baptist.
Each division also reported pressure from rising costs. In the past nine months, Advocate spent $13.3 billion on salaries, wages and benefits, accounting for 58% of total expenses. Supplies and drug costs followed as the next largest expenditure over the first nine months of the year, totaling $4.7 billion.
Overall, Advocate’s total revenue slightly squeaked past expenses at $22.8 billion year to date.
Other nonprofit providers are also reporting continued operational difficulties amid labor shortages and macroeconomic pressures.
Earlier this month, CommonSpirit Health reported a negative operating margin to open its 2024 fiscal year on inflationary challenges, including rising provider costs. Last week, Salt Lake City-based Intermountain Health reported a non-operating income that was 60% lower than the same period last year.
