UH reports $54.7M operating income for 2020 despite significant COVID-related costs

Despite the significant stress that COVID-19 added to health system finances, University Hospitals was able to hit its adjusted budget for last year.

UH rounded out 2020 with operating income of $54.7 million on $4.5 billion in revenue.

The numbers are in line with the adjusted budget projections the system set as the pandemic took hold.

Mike Szubski, UH chief financial officer, called the system’s recovery “nothing short of amazing.”

“And the fact that we ended up ’20 the way that we did, I think is really a testament to this organization and the thoughtful approach,” he said. “We’re going to continue to be very focused on our strategy and really be conscious of cost efficiencies and making sure that we’re maximizing our position, especially from an expense management standpoint.”

COVID-19 added a significant amount of costs. Szubski estimates UH had roughly $120 million in COVID-19 related costs. The pandemic also slowed patient volumes due to temporary requirements to postpone nonessential surgeries and then ongoing apprehension among patients to seek care.

UH’s net patient revenue came in slightly over $4 billion in 2020, as was the case in 2019. But this was less than budgeted at the start of last year.

UH worked to rein in costs in any way it could without impacting operations by examining discretionary expenditures and closely watching supply costs as much as possible — though that was difficult given the pandemic, Szubski said. Other measures included delaying normal July pay increases, freezing some matching on retirement funds, reducing pay for leaders, and with a focus on nonclinical staff, temporarily cutting work hours.

“So we did make some difficult decisions, but we were able to, I believe, keep the overall impact to our caregivers to a minimum, although they were affected,” he said.

The system also benefited from various federal funding made available, primarily about $130 million in granting dollars through the CARES Act.

“So if you put that all together — to come out with again a 1.2% operating margin — that was good work,” Szubski said.

This comes on the heels of a $34.4 million operating loss that the system reported in 2019. The loss was largely attributable to a one-time expense: an insurance payout following a 2018 problem in its fertility clinic that rendered thousands of eggs and embryos unviable and brought a flurry of lawsuits seeking compensatory and punitive damages.

In the years prior, UH reported an operating income of $133 million in 2018 and nearly $144 million in 2017.

UH is aiming to return to these numbers in the next couple of years, Szubski said.

The system is anticipating, and has seen so far in the first quarter, continued lower volumes, he said, adding that the system is on target through the first quarter. UH was able to anticipate and budget for the pandemic’s ongoing impact on costs (such as setting up vaccination clinics).

“As we build up going into the remainder of the year, we anticipate a reasonable operating margin for 2021,” he said, noting that the system is looking at margins in the range of 1.5% to 3% in the coming years.

This story first appeared in our sister publication, Crain’s Cleveland Business.

Source: modernhealthcare.com

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