Mass General Brigham’s operations squeezed into the black during the quarter ended March 31 as its hospitals worked to manage bed capacity and its insurance business more than doubled premiums.
The Somerville, Massachusetts-based integrated nonprofit system reported Thursday a $29.7 million operating gain (0.6% operating margin) during the second quarter of its fiscal 2024, up from the previous year’s $6.1 million loss (-0.1% operating margin).
Net income for the period was $807.3 million on the back of substantial investment returns and was also up from the prior year’s $361.4 million.
Total operating revenues for the period rose 3% year over year to $5.1 billion while net patient service revenue rose 5% to over $3.3 billion. The system attributed the increases in part to systemwide initiatives to address inpatient capacity, which pushed average acute care length of stay down by 2% and paved the way for a 7% rise in discharges.
“By managing transfer requests through a single entry point and eliminating redundancies, the [Mass General Brigham Patient Transfer and Access Center] has driven a 10% increase in successful transfers to [Massachusetts General Hospital], a 17% increase for [Brigham and Women’s Hospital] and a 14% increase in successful transfers from Mass General Brigham’s community hospitals to its academic medical centers,” management wrote in a filing. “This improved efficiency will enhance the impact of a net increase of 94 beds at [Massachusetts General Hospital], after that request was unanimously approved by the Public Health Council last month.”
Mass General Brigham’s other major highlight was health plan premium revenue, which rose 134% year over year to $570 million. This was due to the accountable care organization the system’s health plan began managing last April, which management said “provides an opportunity to develop integrated models of care that improve health outcomes, expand access, and deliver exceptional experiences for the approximately 150,000 members of the ACO.”
The system said that about 23% of its health plan members were in commercial fully insured plans, 38% were in managed Medicaid, another 38% were in self-insured plans and the small remainder were in Medicare plans.
Compared to the prior year’s second quarter, Mass General Brigham also reported a 5% increase in research and academic revenue and a 10% increase in other revenue.
The organization’s operating expenses, meanwhile, rose 12% year over year to $5.1 billion. A 111% increase in medical claims expenses led the way as a result of the ACO membership, which also pushed the health plan’s medical loss ratio from 90.5% to 93.7%. Wages and benefits spending also rose by 7%, and pharmaceutical costs by 25%.
“The system continues to focus on initiatives that will reduce its long-term expense growth trend and enable it to invest in efforts that improve patient outcomes and experience to foster healthier communities,” management wrote.
Nonoperating items were led by $710.9 million of income from investments during the quarter, which the system noted “can vary significantly year to year due to volatility in the financial markets.”
Looking at Mass General Brigham’s performance through the midpoint of its fiscal year, the system sits at $111.3 million of operating income—though it sits at a narrow loss when excluding $116 million of one-time revenue tied to the prior year’s provider activity. It has a six-month bottom line of $1.4 billion, $1.3 billion of which comes from its nonoperating gains.
Mass General Brigham is among the country’s largest nonprofit health systems, having reported $18.8 billion of total operating revenue for the 2023 fiscal year ended Sept. 30. During that time, it weathered a $48 million operating loss (-0.3% operating margin) but a $1.2 billion overall gain thanks to investments and interest rate swaps.
This week’s filing highlighted a slew of strategic initiatives underway across the system, such as increased investments into behavioral and mental health and the integration of clinicians and researchers at its two namesake academic medical centers.