Missouri's Mercy health system attributes 58% drop in operating income to hospital acquisition

The bump in patient revenue that followed the acquisition of a hospital wasn't enough to offset the accompanying increase in the cost of supplies, salaries and benefits for Chesterfield, Mo.-based Mercy health system, which reported a 58% dip in operating income year-over-year during the quarter that ended Sept. 30.

Mercy saw its operating income fall to $12.4 million in the recently ended quarter, down from nearly $30 million in 2016, according to the health system's latest .

That trimmed its operating margin down to 0.8% as of Sept. 30, a decrease from 2.2% in the prior year's quarter.

A Mercy representative was not available to comment.

In a summary of the report, Mercy said the acquisition of St. Anthony's Medical Center in St. Louis on June 1 boosted its operating revenue by nearly 12% compared with the prior year. The acquisition drove up both inpatient and outpatient volumes. Outpatient visits went up by more than 8.2% year-over-year. Emergency department visits jumped 10.1%. Discharges increased by 16.5%.

That new revenue was surpassed by an uptick in expenses, however. Expenses increased by 13.5% during the same time period. Mercy attributed the additional expenses mostly to higher supply and personnel costs. Salaries and benefits as a percent of patient revenue, for example, increased two percentage points to 61.2% over the prior year.

Mercy also saw a significant increase in accounts receivable as of Sept. 30 from the prior year: $133.6 million compared with only $69 million in 2016.

Mercy's bad debt was up as of Sept. 30: $37.7 million compared with $25 million the same time in 2016.

St. Anthony's became Mercy's acute-care hospital in the greater St. Louis region. It's the third-largest hospital across Mercy's four states, according to the health system.

Tara Bannow

Tara Bannow covers hospital finance for Project Japan in Chicago. She previously covered all aspects of health care for The Bulletin, a daily newspaper in Bend, Oregon. Prior to that, she covered higher education for the Iowa City Press-Citizen. She earned a bachelor’s degree in journalism in 2010 from the University of Minnesota.

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