If ever there was a sign that the pandemic is still creating challenges for the health care industry, it would be the year-end financials of the state’s largest system.
Mass General Brigham on Friday reported its 2023 results, and while the system is in the black by $95 million — a welcome return following last year’s record-breaking losses — the view under the hood is cloudier. The system is treating fewer people than it would like to, largely because there is less capacity at nursing homes and rehabilitation facilities that would normally take discharged patients recovering from hospitalization.
Those challenges are holding down the organization’s revenue, even as it faces escalating expenses in its efforts to recruit and retain talent.
This year, the system had two saving graces — COVID relief money still trickling into the books and a robust investment portfolio buoying its bottom line. While Mass General Brigham has been able to use its size and scale to weather those challenges, other systems may not be so fortunate.
“The [health care market] is challenged,” said Ellen Murphy, a health care consultant for community hospitals. “Until we can discharge patients efficiently and train and recruit enough nursing and clinical staff, this will be an ongoing problem. Those that are smaller community hospitals will feel it most acutely and deeply.”
Mass General Brigham’s $95 million operational gain in the 12 months that ended in September compares to a $432 million operational loss the health system reported in the comparable period last year.
But this year’s operating margin was entirely thanks to $143 million in one-time revenues, including COVID relief funding. The federal funding is likely to dwindle, even as hospitals continue to face operational pressures.
Excluding one-time revenue sources, the health system reported a $2 billion increase in revenue over 2022, including a nearly $1 billion increase in revenue from patient activities alone.
The system was able to see more patients and move them out of the emergency room quicker by being more efficient in how it finds them beds. It also launched a systemwide approach to finding beds for patients with behavioral health needs.
These efforts to manage capacity issues meant patients stayed in the hospital on average half a day less, allowing the health system to carry out 3 percent more discharges than last year — translating to more revenue.
Mass General Brigham’s hospitals were fuller than ever, running at more than 100 percent occupied, said Niyum Gandhi, chief financial officer for Mass General Brigham.
But Gandhi said patients are on the whole sicker than they have been in years past, leading to longer hospital stays. Statewide challenges discharging patients, due to staffing shortages at nursing homes and rehabilitation facilities, have also made it difficult for hospitals to free up beds and accommodate more patients.
Despite more of the beds being full, because each patient is staying in each bed longer, the health system saw fewer patients overall this past year than it did in 2019.
As hospitals are largely reimbursed on a per patient basis, and not the length of time patients stay in the hospital, the volume challenges have held back revenue.
Community hospitals are likely to see more of those challenges. They have also struggled to discharge patients to places such as nursing homes — a function not only of capacity problems but the insurance approvals necessary, Murphy said. But they also have issues transferring patients to large health systems in Boston when they need higher levels of care, because bed capacity at academic medical centers is constrained.
“Generally, community hospitals are continuing to face razor-thin to negative operating margins,” Murphy said.
Meanwhile, operating a health system has become more expensive than ever. At Mass General Brigham, operating expenses increased by $1.6 billion over 2022, largely a function of escalating wages.
Unlike in years past, when the use of expensive temporary labor ratcheted up expenses, Mass General Brigham’s labor expenses rose because it is paying more in its permanent roles, Gandhi said. As the system worked to recruit and retain permanent talent, many jobs saw salary increases, leading to a $543 million increase in wage expenses.
The health system did recently offer buyouts to 2,000 people who work in the digital unit. Officials declined to specify how many people accepted the buyout, but it is continuing to cut, with the system planning to eliminate an additional 20 jobs.
However, Gandhi said the reduction was more about the digital needs of the organization than a cost-cutting move, and were too small to materially affect the finances of the 82,000-person organization.
Despite operational pressures, the system’s total margin was elevated by market performance on its robust investment portfolio, grossing $1.2 billion in the 12 months ending in September. That compares to a $2.3 billion overall loss reported in the same period last year.
Yet not all health systems will have such a cushion to fall back on.
“Larger hospitals tend disproportionately to have very large investment portfolios,” said Dr. John Freedman, CEO of health care consultancy Freedman HealthCare. “Larger hospitals with big endowments have that as an advantage over their peers in the market. They have a ready source of funds, not only in times of trouble, but a ready source of income their competitors don’t have or don’t have to that extent.”