By Tracey Drury – Reporter, Buffalo Business First
Aug 2, 2023
Despite ongoing operating deficits, the region’s two largest health systems have seen improvements in revenue, patient volume and staffing in the first half of the year.
In separate interviews with Buffalo Business First about their financial situations, the leaders of both Kaleida Health and Catholic Health both expressed optimism about mid-year performance but remained realistic about the challenges facing their organizations and the industry as a whole tied to labor and ongoing reimbursement challenges.
It’s the same story coming from hospitals across the country, many of whom are seeing continued margin improvement while continuing to underperform as high expenses and economic pressures persist. That’s according to a new report by Kaufman Hall, a national consulting firm, based on financial data from more than 1,300 hospitals.
Catholic Health: Record volume
Through June, Catholic Health reported revenue of $688 million, compared to $597 million last year, and a deficit of $21.4 million, versus $103.4 million lost during the same period a year ago. The Buffalo-based company had projected a mid-year loss of $60.3 million.
Mark Sullivan, Catholic Health CEO, says though there’s still much work to do, the system is seeing record numbers of patients and revenue coming into the system compared to pre-Covid levels.
“There is this level of confidence that’s coming back with consumers to get back to their health care routine,” he said.
In May, for example, Catholic Health reported the highest revenue month in its 25-year history, with most service line categories exceeding projections, led by surgical procedures and the emergency department, up nearly 17% - and that’s before the opening of the temporary ED in Lockport.
When it comes to expenses for labor, the company has spent less on labor halfway through the year, despite increasing its workforce from 7,195 to 7,484 FTE. That’s because even though the labor contract included wage increases, the company was able to cut its expenses for temporary and agency workers by more than half from $62 million last year through June to $29 million during the same period this year.
“We’re still running 2% less than last year in terms of total labor costs, and that’s driven around reduction on utilization for agency,” said David Macholz, chief financial officer. “And we’ve seen significant reduction in turnover, driving up retention and a record year in terms of recruitment of clinical workers.”
And though it can’t predict how the year will end up for sure, Catholic Health is trending well ahead of its initial projection for a year-end $98 million loss for 2023. Sullivan says workforce gains are a major part of that potential.
“This is a partnership with our workforce, that is ensuring we’re as efficient as we can be as a health system,” he said.
Kaleida Health: Beating projections
Meanwhile, Kaleida Health saw revenue of $1.13 billion through June, with a loss of $12 million, an improvement over the $37 million projected deficit for the first half of the year.
“I would say its improving, but there are still significant challenges that impact the financial performance of the entire industry,” said Don Boyd, Kaleida CEO. “After the last three years of Covid, we had said this was going to be a multi-year recovery to work to get back to profitability.”
In 2022, revenue held steady for Kaleida at about $2.05 billion, but a deficit led to operating losses of $80.6 million and an net loss of $120 million including investment losses. That followed a $46 million loss the year prior.
Patient volume improvements are a big part of that through June, with numbers far ahead of budgeted projections for all lines of business, he said, even if they’re not quite back to pre-pandemic levels.
Boyd points to changes in patient behavior, expanded access across the community and deliberate growth strategies – including a $300 million margin improvement plan focused on recruiting and retention, collecting more revenue and operating efficiencies.
That’s while finding ways to address ongoing inflation and supply costs and reimbursement issues and the continuing need for agency nurses, which cost Kaleida $109 million last year.
“It’s coming down, but coming down slowly,” he said. “We are making meaningful and measurable progress against all of our goals. We’re ahead of where we thought we’d be, so that’s great.”