Dive Brief:
- Advocate Aurora Health reported an operating loss of almost $24 million on revenue of $14.5 billion in 2022 as expenses rose due to higher labor and supply costs. That’s compared to an operational gain of $594 million in 2021.
- Turbulent financial markets and investment losses also contributed to the nonprofit’s net loss of $751 million, compared with net income of $1.8 billion in 2021.
- Nonprofit health systems have posted significant losses in 2022, which research has suggested was the worst financial year for hospitals since the beginning of the COVID-19 pandemic.
Dive Insight:
Roughly half of U.S. hospitals ended 2022 with negative margins, according to hospital consultancy Kaufman Hall. Trends suggest that high labor and supply expenses, along with inflationary pressures, will continue to batter nonprofits this year, contributing to a ‘deteriorating’ outlook for the sector even as margins stabilize.
Hospital lobbies have cited a tricky operational environment in calls for more federal aid. However, academic studies have found that federal financial assistance to hospitals during COVID-19 has offset the worst of operating losses.
In addition, much of the financial strain that’s being reported by large nonprofits is due to investment losses, not higher costs, according to a recent analysis in Health Affairs.
Other major nonprofits have posted net losses in 2022, blaming performance on large investment losses and rising costs for labor and supplies.
Providence, Kaiser and the Cleveland Clinic reported net losses of $6.1 billion, $4.5 billion and $1.2 billion, respectively, in 2022. The Mayo Clinic reported net income of $2.2 billion, down almost 60% from the year prior.
Advocate Aurora completed its merger with North Carolina-based Atrium Health in December to create the fifth-largest nonprofit in the U.S. by revenue. The combined health system has 67 hospitals in six states, and annual revenue of $27 billion.
Atrium’s finances are not included in the results posted Tuesday. Advocate “maintains it separate legal existence,” the report says.
