By Tracey Drury – Senior Reporter, Buffalo Business First
Jul 4, 2024
Catholic Health’s recent bond ratings success is part of a slow but noticeable trend among hospitals, where finances are beginning to turn around.
The Buffalo-based health system saw its bond rating revised by S&P Global Ratings from negative to stable in early June, with the ratings agency pointing to significant operational improvement and narrower operating losses.
Catholic Health isn’t alone: Despite a rough start to the year tied to high hospitalizations and a national cyberbreach, Buffalo’s largest health systems began to see signs of financial recovery in first quarter.
Kaleida Health and ECMC also reported increased volume at emergency departments, as well as within outpatient and surgery programs helped boost revenue, giving hospitals a chance to shrink deficits as they work toward break-even goals for 2024. Those small successes coincide with ongoing challenges tied to labor expenses and high costs for supplies – the same trends affecting hospitals nationwide, according to Kaufman Hall, which draw on data from more than 1,300 hospitals nationwide.
“Generally on a year-to-date basis, as well as compared with prior years, hospitals have generally started out the year in much better shape,” said Erik Swanson, a senior vice president with Kaufman Hall. “When we look at overall margins, they’re still relatively healthy.”
That doesn’t mean systems are doing well, however. Although financials continued to improve during April, 40% of hospitals across the country are losing money and there continues to be a greater divide between high and low-performing hospitals, he said. Still, hospitals in the Northeast are doing better than their counterparts in recent months and Swanson expects this year will be better than prior years.
Here’s how the local systems say they’re doing.
Catholic Health
Catholic Health reported revenue of $366 million through first quarter with losses from operations of $9.8 million. That’s an improvement of $21.8 million year-over-year and $9.1 million ahead of plan. Revenue was $5.2 million above budget, due in part to increased patient visits, increased reimbursement rates and higher inpatient surgical volume.
That’s after a rough 2023, when Catholic Health had $1.4 billion in revenue and a deficit of $43 million.
Officials credit the opening of the new Lockport Memorial Hospital last fall, new primary and specialty care offerings inside the building, and expanding services at the nearby Niagara Ambulatory Center on Transit Road.
David Macholz, chief financial officer, said both were part of a larger plan to increase overall revenue systemwide.
“It’s all about creating a more efficient delivery system and ensuring the highest level of care possible and a great patient experience. That was the strategy,” he said.
On the challenges side, the system is dealing with shortages at just about every level of the organization, from nurses to coders and doctors. Then there the losses tied to the Change cybersecurity attack as well as delayed payments tied to claims denials and appeals from payers.
“The reality is the whole market and in so much of the country, we’ve been struggling in health care just to continue to survive. There’s so much financial pressure on us,” said Joyce Markiewicz, CEO.
Kaleida Health
Kaleida Health has seen a strong start to the year as well, despite unexpected challenges including winter weather events that led to reduced case volume plus increased costs. Volume through April was ahead of budgeted figures for discharges, emergency volume and outpatient services.
That increased volume also translates to better than expected revenue. Through April, Kaleida reported operating losses of $8.8 million, including $5 million tied to the winter storms, on revenue of $805 million. That was $16 million ahead of plan. For 2023, Kaleida ended the year with a $30 million operating loss on revenue of $2.3 billion.
“Across the board, we’re really seeing strong volume,” said Don Boyd, CEO. “We’re not back to pre-pandemic levels across the board, but volume is returning and a lot of that is related to work we’re doing to increase access and make it easier for patients.”
Those growth strategies are targeting key service areas like primary care, OB-GYN, oncology and cardiology. Boyd said the other factor in boosting volume is a focus on creating quality patient experiences and improving access, which are leading to higher scores on patient satisfaction surveys.
Making patients happy is a key goal for all health systems: Happy patients come back when they need more care and they refer their friends and family. Making that happen starts with things like reducing turnaround times to schedule surgeries and reducing wait times in emergency departments.
Erie County Medical Center
Erie County Medical Center is seeing improvements for 2024 as well, with operating losses in first quarter of $7.5 million compared to $20.8 million year-over-year. That’s after reporting a year-end deficit of $6.2 million for 2023 on revenue of $871 million. Operating losses of $12.4 million were tempered by strong investment returns.
Jon Swiatkowski, chief financial officer, said the system has budgeted a loss of $35 million for 2024 without any additional support from the state. That’s compared to 2023, when losses were balanced out by state and federal assistance exceeding $100 million.
Through first quarter, ECMC saw volume increases for inpatient services, surgeries and emergency visits up by 6% apiece, while length of stay dropped from 9 days to 7.9 days. That's in addition to ongoing efforts to cut readmissions.
“We’ve seen improvements this year really led by volume,” said Tom Quatroche Jr., CEO. “People are coming back, and they’re choosing ECMC. … We’ve seen improvements in throughput throughout the building, which has allowed for more volume.”
But Quatroche stressed that all health systems are facing the same inflationary challenges with reimbursement not keeping up with cost increases. Then there are the ongoing denial of service fights the hospital must face with payers.
“It’s financially challenging. We’re still operating at a loss,” he said. “We’re up 14% total revenue year-over-year, but we’re still seeing increases in expenses on all fronts. Some are controllable, but some are not, and we’ve cut total expenses year-over-year by 8%.”