Trinity Health reported a familiar refrain among healthcare systems during COVID-19: decreased revenue and narrower operating margins, buoyed by federal relief funds. And while the operator of 92 hospitals in 22 states posted a net deficit for fiscal 2020, it is in some ways in better shape than it was in the prior year.
The Michigan based-system reported operating revenue of $18.8 billion for the 2020 fiscal year that ended on June 30. It had revenue of $19.3 billion in fiscal 2019, representing a 2.4% drop. Trinity blamed that partly on the pandemic, but also divestiture of the Lourdes Health System. Factoring out Lourdes, operating revenue increased 0.4%.
Trinity has responded to the crisis by cutting executive compensation by nearly $70 million and furloughing staff. Partly as a result, its cash on hand grew from 180 days at the end of fiscal 2019 to 245 days at the end of fiscal 2020, up more than 36%.
COVID-19 led to wholesale cancellations of lucrative elective surgical procedures, plummeting emergency room visits and other cutbacks in patient utilization during the first few months of the pandemic. Trinity Health is no exception to that rule. It reported that net patient service revenue declined $658.7 million during fiscal 2020, excluding the Lourdes divestiture. Patient volumes also declined 6.1%; when adjusted for case mix, equivalent discharges were down more than 22%.
Moreover, Trinity reported that its COVID-19 response added $127.1 million in direct costs to its operations during fiscal 2020. That’s on top another $67 million in expenses related to adopting a new EHR system and another $212.4 million in outsourced medical professional fees and software data services.
Although Trinity reported an operating profit before special items of $74.7 million for fiscal 2020, it was down from $142.7 million in the prior fiscal year. But factoring in all items, Trinity reported an operating loss of $344.7 million for the fiscal year, compared to operating income of $106.8 million in fiscal 2019.
In total, Trinity reported a net deficit of $34.5 million for fiscal 2020, compared to a net surplus of $834 million in fiscal 2019.
However, that also included $644 million in Coronavirus Aid, Relief, and Economic Security act funds received in its fiscal fourth quarter. That’s a sharp contrast to for-profit hospital operator HCA, which announced late last week it was returning the $6 billion in CARES funding it received.
The CARES funds did help balance out the deepest valleys, as shown by the actual modest increase in operating revenue and the significant bump in cash on hand. And Trinity’s total assets increased $3.5 billion to $30.5 billion at the end of the fiscal year.
However, a significant amount of that is qualified: $1.6 billion in additional assets are credited to advances in Medicare payments under CARES, while another $1.3 billion was due to credit line drawdowns and proceeds from new debt. As a result, Trinity’s debt to capitalization rose to 37% at the end of fiscal 2020, up from 35.4% in fiscal 2019.
Trinity also “projected lower revenue during fiscal 2021 as a result of the COVID-19 pandemic,” but did not break out specific numbers.