Mass General Brigham says patient revenue may fall $1.5 billion below budget

But signs of recovery include resumption of retirement contributions for employees this fall

Massachusetts General Hospital pictured in the early days of the coronavirus pandemic.Blake Nissen for the Boston Globe

Mass General Brigham, the state’s largest health care network, said patient revenue would fall as much as $1.5 billion short of its forecast for the year because of disruptions caused by the coronavirus pandemic.

The company, formerly known as Partners HealthCare, issued the estimate Friday along with financial results showing an operating loss of $373 million in the quarter ended June 30. The loss, its largest ever, compared with an operating profit of $156 million in the same quarter a year earlier. Operating revenue fell 13 percent to $3.1 billion.

“The brunt of the pandemic hit in the quarter,” Peter Markell, Mass General Brigham’s chief financial officer, said in an interview. “We took a big hit but are working our way back.”

Markell said the company’s revenue improved in each of the three months of the quarter, with inpatient services “coming back close to 100 percent.” Revenue from outpatient services remains depressed as people delay going to the doctor or hospital for nonurgent care.

Mass General Brigham is the state’s largest private employer, with 78,000 workers at its 12 hospitals, clinics, doctors practices, and insurance division. When the pandemic hit in mid-March, the company canceled all nonurgent medical procedures and outpatient programs, which generate the bulk of its revenue.

Net patient-service revenue tumbled 29 percent to $1.8 billion in the quarter, and is down $656 million in the first nine months compared with the previous fiscal year.

Mass General Brigham said in a statement that “based on the pace of recovery through July and assuming the prevalence of COVID-19 cases remains relatively constant,” it expected patient volume to return to more than 90 percent of pre-pandemic levels by the end of September, which is the end of its fiscal year. Still, the company said patient revenue is expected to come in below its original budget projection by $1 billion to $1.5 billion.

To compensate for lost revenue and rising costs from COVID-19 care, the company previously suspended capital projects and imposed a hiring freeze for nonclinical positions. It also cut compensation for top executives by 25 percent, and 5 percent to 20 percent for other senior leaders.

Merit increases were canceled for employees earning $26.50 or more an hour, and the company’s contributions to retirement plans for those employees were suspended. On Thursday, Mass General Brigham said the retirement contributions would resume starting Oct. 1 or Dec. 1, depending on the plan.

Moving to protect its liquidity, the company has redeemed $1.5 billion of long-term investments, about 15 percent of its holdings, and issued $525 million in short-term debt. It ended the quarter with $1.9 billion in cash and equivalents, compared with $289,000 at the start of the fiscal year.

The company’s balance sheet is “clearly weaker than a year ago,” Markell said, “but we are in pretty good shape to weather what comes at us.”

He cited four pivotal factors for Mass General Brigham as it moves forward: Whether the recent rebound in patient revenue is sustainable; whether Massachusetts is hit with a second coronavirus wave, and how severe it is; how many people lose their employer-funded health insurance; and the performance of the stock market, which drives the company’s investment portfolio.

“We are cautious about how the economy performs in the future,” Markell said.