The Henry Ford Health System had a $12-million operating loss last year amid the cancellation of its planned merger with Beaumont Health System, the installation of a pricey medical records system and decisions by more patients to cut back on hospital and doctor visits due to higher insurance deductibles and copays.
Total revenue for 2013 climbed $32 million to $4.52 billion. The hospital system's net income was a positive $500,000, as the sale of a dialysis unit in Toledo offset the operating loss.
Henry Ford CEO Nancy Schlichting said these latest financial results, released to the public this week, reflect challenges in the health care business that affected hospital systems across the country.
She said the Henry Ford system faced various new costs and Medicare reimbursement cuts in 2013 stemming from the Affordable Care Act, but had yet to feel the anticipated boost of having newly insured patients because coverage under the law didn't begin until this year. The Medicare cuts alone totaled $30 million.
"We're doing OK," Schlichting said. "Our balance sheet is stable. Our earnings are not what we'd like, but we anticipated them."
Bond rating agency Moody's Investors Service said last month that it had placed Henry Ford's credit rating under review for a possible downgrade because of an unexpected decline in the nonprofit health system's "already low operating cash flow."
The agency also pointed to the May 2013 cancellation of its planned merger with Beaumont as a cause for concern.
Yet in an interview this week, Schlichting recalled that Henry Ford was the one approached by Beaumont for a merger, and can easily go it alone.
"We never thought we were running to a merger to save us," she said.
Schlichting said Henry Ford is poised for a stronger 2014 because it is finally done installing the medical records system and anticipates new revenue from Michigan's recent expansion of Medicaid coverage to more low-income people.
Although Medicaid reimburses Henry Ford for only about 60% of the costs of a patient's hospital visit, that amount is better than getting nothing for a treatment that still would have been given if the patient lacked any health coverage.
The reported cost of Henry Ford's uncompensated care for underinsured and indigent people rose $18 million last year to $314 million. That figure includes charity care, bad debt and the unpaid cost of Medicaid and some Medicare procedures. Hospitals can sometimes net modest profits on Medicare procedures.
Schlichting said Henry Ford Hospital in Detroit experienced a significant decrease in patient admissions last year, and doctors throughout the system are getting fewer visits (yet more unpaid bills) from patients whose health insurance copays and deductibles have gone up.
What's more, Henry Ford surgeons are finding themselves much busier at the end of each year because by then patients are closer to fulfilling their annual deductible.
"Some people are choosing not even to go to their doctor for primary care visits because they can't afford the copays," she said.
One bright spot on Henry Ford's balance sheet was the cost of insuring its own 17,964 employees. The total cost of health care for those workers dropped 14% in the past three years, and Schlichting credits the organization's wellness initiatives, including a decision to stop hiring smokers and serve healthier food in its cafeterias.
"We got rid of the fryers," she said. "We don't have one fryer in this health system."
Henry Ford financial statistics
- Had a $12-million operating loss last year
- Revenue grew $32 million to $4.52 billion
- Currently has 17,964 full time-equivalent employees
- Spent $356 million in recent years on new electronic medical records system
- 43% of its patients on Medicare