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Carolinas HealthCare says 2014 was profitable after bleak start

Carolinas Medical Center.
Carolinas Medical Center. mhames@charlotteobserver.com

A year that began with a bleak financial forecast for Carolinas HealthCare System ended with a $173 million operating profit for its Charlotte-area medical facilities, executives reported Tuesday in their 2014 roundup.

That’s up almost 80 percent over the previous year, a huge turnaround after 2014 began with a forecast that the system would see its first loss in more than 30 years.

Executives say that’s because a surge in patients, especially those with complex and costly conditions, more than offset the anticipated challenges, such as cuts in Medicare reimbursements and the state’s decision not to expand Medicaid.

For instance, the entire system of hospitals, medical practices and other facilities owned and managed by CHS saw charity care and unpaid bills rise almost 8 percent, to $2.3 billion in 2014. But during that same time total patient revenue rose 11.5 percent, to $24.8 billion.

“It’s a great year compared to the forecast,” said President and Chief Operating Officer Joseph Piemont. “In dollar terms it looks like a lot, and I’m not saying it’s not.”

But he cautioned that the profit is relatively small in the context of a large organization, and “there’s still a lot of uncertainty.”

Carolinas HealthCare System, the region’s largest employer with a work force of about 60,000, includes Carolinas Medical Center and other hospitals, physician practices, freestanding emergency departments and surgical centers, home health agencies, nursing homes, behavioral health centers and hospice services.

It is a not-for-profit organization, which means that revenue is invested in clinical programs, facilities and services.

This time last year, system executives projected a $5 million loss. But the financial outlook brightened beginning in the second quarter.

In September, officials announced they had cut more than 100 management jobs, from a management force of about 2,000, to prepare for ongoing challenges in 2015. Most of those cuts involved vacant positions that weren’t filled, rather than layoffs.

“We did a lot of work that we needed to do,” Piemont said.

Here’s a close-up on some of the specifics:

Boom in patients

The core facilities owned by CHS, including 11 hospitals in the Charlotte region and a number of medical practices, saw patient traffic increase across the board. Hospital days were up 4.5 percent, emergency room visits up 4.2 percent, inpatient surgery up 2.1 percent and physician visits up 5.6 percent.

The system also manages 28 other hospitals and additional medical facilities across a broader region. When those are added in there was a slight decline in total days spent in hospitals and inpatient surgery.

More insured patients

Piemont credits the 2014 debut of the Affordable Care Act exchange for boosting the number of insured patients using the system. The exchange offers subsidies to low- and moderate-income people who don’t have workplace coverage.

In particular, he said, a Coventry Carelink plan that partnered with CHS brought in large numbers of people who hadn’t had insurance before. This year CHS also joined with Blue Cross and Blue Shield of North Carolina to offer plans on the exchange that exclusively use CHS as the network.

Unpaid bills

Although charity care and bad debt accounted for a smaller percentage of patient revenue than last year, it still rose by $174 million. The core business in the Charlotte region saw unpaid accounts rise by $85 million, to $1.3 billion.

Piemont said states that accepted federal money provided in the ACA to expand Medicaid have seen big drops in uncompensated care as the poorest adults gain government coverage.

New facilities

Capital spending dropped sharply, by 16 percent in the core enterprise and 13 percent across the total system.

That might surprise people who have seen new facilities and renovations abound in 2014. For instance, CHS opened a new behavioral health center in Davidson and new emergency departments in the SouthPark area and Harrisburg. But officials say most of that work started in 2013 and pumped up that year’s capital spending.

Piemont said 2015 will be another slow year for new projects. He said the system will focus on handling patient growth through its existing locations, by extending hours or streamlining procedures so there’s less waiting, for instance.

Helms: 704-358-5033;

Twitter: @anndosshelms. This article is done in collaboration with Kaiser Health News, an editorially independent program of the Kaiser Family Foundation.

By the numbers

Here’s what Carolinas HealthCare System reported for 2014, compared with the previous year. “Primary enterprise” encompasses 11 hospitals, including Carolinas Medical Center, owned by the system, as well as medical practices, behavioral health services and free-standing medical facilities owned by CHS. “Total enterprise” includes hospitals and practices managed by CHS and spread across a broader region.

Primary enterprise

▪ The system reported $4.9 billion in operating revenue, up from $4.6 billion.

▪ After expenses, that generated a $173 million profit, up from $96 million.

▪ With income from investments, interest and dividends added in, revenue exceeded expenses by $284 million, down from $338 million. (The system’s investments fared much better in 2013.)

▪ Patient days (not counting newborns) rose from 536,729 to 560,632.

▪ Physician visits rose from 4.8 million to 5.1 million.

▪ Total patient revenue rose from $12.5 billion to $14 billion.

Total enterprise

▪ CHS reported $8.5 billion in operating revenue, up from $7.9 billion.

▪ After expenses, that generated a $261 million profit, up from $78 million.

▪ With income from investments, interest and dividends added in, revenue exceeded expenses by $450 million, down from $548 million.

▪ Patient days (not counting newborns) dropped from 1.16 billion to 1.15 billion.

▪ Physician visits rose from 6.6 million to 7.2 million.

▪ Total patient revenue rose from $22.3 billion to $24.8 billion.

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