Amid warnings that many Oregon hospitals are in financial crisis, Oregon Health & Science University on Monday issued a glowing financial report for the second half of 2022, saying it turned a surprisingly large profit as strong patient revenue more than covered higher personnel costs.
OHSU also reported that its net worth – the value of all its assets including stocks, bonds, buildings and equipment, minus its liabilities such as debt – is up 10% since just before the pandemic. The gain is largely due to the growth of the investment portfolios held by OHSU and its foundation.
“Healthcare across Oregon and the nation is facing serious financial challenges,” wrote CFO Lawrence Furnstahl in his financial report to the OHSU board, which meets Thursday. But by controlling costs and working to boost revenues, OHSU was able to post an operating profit of $56 million for the second half of 2022, compared to the $2 million operating loss it had budgeted for, he wrote.
Net patient revenue for the six months was $1.48 billion, up from $1.3 billion for the same period a year earlier, Furnstahl wrote. Patient volumes were up across the board, from surgical cases to day visits and emergency visits, he wrote.
The net worth of OHSU and its foundation, up 10% in the past three and a half years, now stands at $3.98 billion, up from $3.62 billion in mid-2019, Furnstahl said in his report.
In addition to being helped by rising stock and bond values, OHSU’s balance sheet benefitted from federal pandemic-related grants, he noted.
OHSU’s rosy report comes as some Oregon hospital leaders argue that many of the state’s hospitals are in bad financial shape after several quarters of operating losses, and that the state Legislature in the upcoming session must provide help.
The state needs to increase the amount it pays hospitals to care for Medicaid patients, as well as fund new efforts to boost training and recruitment of health care workers, the Oregon Association of Hospitals and Health Systems said earlier this month.
Beating A Break-even Budget
In its budget for the 12 months starting last July 1, OHSU had anticipated a break-even year. But right from the start, things went better than anticipated. In July-September, OHSU reported an operating loss of $5 million, compared to a budgeted $16 million loss. Then, in October-December, revenues jumped, creating a profit of $61 million, compared to an anticipated $13 million profit.
Net patient revenue was up 12.6% in the second half of 2022 compared to the year-earlier period, while OHSU’s single biggest expense – salaries and benefits – was up just 8.6%, Furnstahl wrote.
Like many other hospital systems in Oregon and nationwide, OHSU is spending more heavily on staff. Across the state in contract negotiations, labor unions representing nurses and other hospital workers have pressed for big wage increases to cover inflationary living costs, reward workers for sticking through the pandemic, and attract new hires to replace workers who have retired.
Meanwhile, OHSU’s investment portfolio has experienced recent fluctuations due to stock and bond market surges and declines, yet has registered big gains from where it stood several years ago.
“After losses in (the July-September period) stock and bond markets rebounded in October and November before falling again in December, with high volatility,” Furnstahl wrote.
“OHSU-held cash and investments are essentially flat through” the second half of 2022, Furnstahl wrote.
As of the middle of 2022, OHSU and its foundation held nearly $3 billion in cash and investments, up from $2.1 billion in mid-2018, according to OHSU’s annual financial statements.
Even after the steep market declines in the first half of 2022, stock market indexes are still up 25% or more from just before the pandemic.
Reflecting OHSU’s continued financial strength, its bond ratings have remained unchanged - and very high – from before the pandemic through to the present. Fitch gives OHSU bonds an AA- rating, on its scale from AAA to D. Moody’s gives them an Aa3 rating, near the top of its Aaa to C ratings scale.
You can reach Christian Wihtol at [email protected].