Dignity Health saw rocky end to 2018 as revenue and investments tumble

Dignity Health saw its revenue and profit margin slide in the last half of 2018 as the not-for-profit system worked to close its merger with Catholic Health Initiatives, which it did Feb. 1.

Weak investment returns contributed to the not-for-profit system’s $198 million loss attributable to San Francisco-based Dignity in the six months ended Dec. 31, 2018, compared with an excess of revenue over expenses of $635 million in the 2017 period, an $833 million negative swing. The system’s overall profit margin went from 8.4% in the latter half of 2017 to a negative 3% margin in the latter half of 2018.

Like other health systems, Dignity’s results were dragged down by a heavy investment loss. The system lost $179 million on investments in the six months ended Dec. 31, 2018, compared with a $287 million gain in the prior-year period.

CHI was also hit by the late 2018 stock market downturn, posting a significant quarterly bottom line loss driven in part by $331 million in investment losses.

But Dignity also struggled on the operating front. Its revenue fell nearly 7% to $6.7 billion in the six months ended Dec. 31, compared with $7.2 billion in the prior-year period. The system’s expenses were $6.7 billion in the 2018 period and $6.9 billion in the prior-year period.

Dignity generated $13 million in operating income in the latter half of 2018, down 96% from $338 million in the prior-year period.

Dignity spent $21 million in cash on operating activities in the latter half of 2018, compared with $360 million in cash provided from operating activities in the prior-year period. Dignity spent $512 million in cash on investing activities in the 2018 period, compared with $7 million in the 2017 period.

Dignity’s admissions fell slightly to 194,107 in the latter half of 2018, compared with 193,644 in the prior-year period. Adjusted patient days grew 2.5% during that time to 1.4 million.

Salaries, wages and benefits represented 52.1% of Dignity’s net patient and premium revenue in the 2018 period, compared with 49.5% in the prior-year period.

Dignity’s alignment with fellow not-for-profit system CHI to form CommonSpirit Health created a combined system with about 150,000 employees and 25,000 physicians and advanced care clinicians, according to Dignity’s report. It operates 142 hospitals and more than 700 care sites across 21 states. In fiscal 2018, CHI and Dignity had combined revenue of $29.2 billion. Despite the closing, the two systems’ debt remain separate until they can be consolidated.

https://www.modernhealthcare.com/article/20190220/NEWS/190229994