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Novant’s profit rises to $274 million in 2012, from only $1 million in 2011

Profits soared for Novant Health in 2012 compared to the year before, the Winston-Salem-based health care system reported Tuesday.

The system, which operates four hospitals in Mecklenburg County, reported net income, or profit, of $274 million last year, compared to $1 million in 2011. Net income in 2010 had been $158 million.

Officials said part of the improvement was due to investment income, which rose from a $19 million loss in 2011 to a $109 million gain in 2012.

“It was a good year for us financially,” said Fred Hargett, Novant’s chief financial officer. “It’s a reflection of the volatility both in the economic environment generally as well as the health care industry specifically. A big piece of our net income is from investment income.”

Hargett said Novant’s 2012 financial picture benefited from a new Medicaid assessment program in North Carolina. Under the program, hospitals pay an assessment each year, and the state uses the money as a match to draw more federal funds for treating Medicaid patients.

The state returns most of the money to the hospitals. The program was retroactive to 2011, so Novant reported two years of reimbursement, $97 million, in 2012 instead of spreading it over two years.

Even with that extra reimbursement, Hargett said the system loses more than $100 million on providing care for patients covered by Medicaid, the federal-state government health program for the poor and disabled.

Opportunity to reinvest

Hargett said Novant’s bottom line was also helped by “good operating performance. ...We needed to produce a good year to reinvest in our operations.”

Total revenue for Novant was $3.5 billion in 2012, compared to $3.4 billion in 2011.

As a private, nonprofit system, Novant must reinvest any extra revenue into its operations and improvements. The system owns 13 hospitals, about 350 physician clinics in North Carolina, South Carolina, Virginia and Georgia.

Over the next five years, Novant plans to spend $1.5 billion on capital expenditures, including $600 million to convert from paper to electronic medical records.

All doctors’ offices are expected to be using the system by the end of 2013. Presbyterian Hospital will be the first Novant hospital to go to electronic records in October. Other hospitals should be converted by the end of 2015.

Other capital projects include the addition of a fifth floor, with 29 new beds, at Presbyterian Hospital Matthews; a recently opened addition with 15 new beds, for a total of 75, at Presbyterian Hospital Huntersville; and ongoing renovations at Presbyterian Hospital.

Hargett said Novant plans to issue about $600 million in bonds this year. Half would refinance existing debt at lower interest rates than when they were first issued as long ago as 2002. The rest will be used to finance ongoing and future projects.

Patient visits and charity

Patient volume was “not remarkably different” in 2012 over 2011, Hargett said. The system continues to feel the effects of the recession, with fewer patients having office visits and outpatient surgery but a slight increase in hospitalized inpatients.

The amount of free or charity care provided to uninsured patients stayed about the same, at $123 million in 2012.

Overall, the system provided $546 million in community benefit, which includes charity care, community outreach, support for free clinics and losses from treating Medicare and Medicaid patients.

Garloch: 704-358-5078
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