Beaumont: Finances better than expected amid COVID-related income loss
Beaumont Health's finances through the third quarter rebounded better than expected from last spring's COVID-19 surge in Metro Detroit, despite more than a $200 million loss in operating revenue over this time last year.
Patient volumes, operating income and non-operating income at the eight-hospital health system recovered better than anticipated from the explosion of cases in March and April, when hospitals across Michigan were hemorrhaging cash. Surgical revenue dried up because of canceled elective procedures due to Gov. Gretchen Whitmer's orders and increased costs for personal protection equipment.
Southfield-based Beaumont is Michigan's largest health system and has treated more COVID-19 patients than any health system in the state.
“While 2020 has been a challenging year for all health systems, we have taken steps to lead through the COVID-19 pandemic as well as position ourselves for the future," Beaumont Health Chief Financial Officer John Kerndl said in Monday's press release.
"We have built inventories of personal protection equipment (PPE) to ensure our caregivers and physicians have the necessary supplies to safely practice medicine in our facilities, purchased the necessary supplies and equipment to successfully lead vaccination efforts in our communities and invested in our most important asset — our staff,” he said.
As of Sept. 30, Beaumont’s net income was $61.2 million, a decrease of $197.4 million over the same period in 2019, the health system reported. Operating revenues fell to $3.29 billion, a $200.6 million decrease over the $3.49 billion reported at the end of the third quarter in 2019.
Net operating income — before other non-recurring expenses such as restructuring charges and settlements — was $67.6 million for the first nine months of the year, a $63.4 million decrease from 2019’s net operating income of $131 million. The operating margin of 2.1% in the third quarter was down from 3.8% in the same period a year ago.
Non-operating income through the third quarter was $13.2 million, a $117.7 million decrease from the same period last year.
According to the health system, Beaumont’s treasury indicators remain strong, primarily as a result of cash increases related to Medicare advanced payments of $504 million, CARES Act payments and deferred payroll taxes in the year. Cash and investments totaled $3.38 billion at the end of the third quarter, compared with $2 billion for the same period in 2019.
As of Sept. 30, unrestricted days cash on hand was 304.4 days in 2020 compared with 174.1 days in 2019. The health system's total debt is $1.47 billion, compared with $1.53 billion for 2019.
On April 21, Beaumont announced it would temporarily lay off about 2,475 employees and permanently eliminate about 450 positions due to the COVID-19 pandemic. CEO John Fox took a temporary 70% pay cut while other executives saw their salaries cut by up to 45%.
Beaumont said the health system has been making a concerted effort since July to return furloughed employees back to work, is launching staff retention and referral programs to recruit more staff as the system continues to rebound to normal operating levels.
Last week, the health system said it was providing a tax-free $1,000 recognition payment for full-time employees, increasing the minimum wage to $15 per hour, making other related compensation adjustments and increasing the shift differential for nursing and some other positions.