Labor shortage, inflation contribute to Mass General Brigham's $949M net loss

Photo: John Fedele/Getty Images

Significant financial pressures, including a widespread labor shortage, cost inflation and the enduring capacity crisis, have contributed to a rough financial quarter for Mass General Brigham, which saw a $949 million net loss and -2.8% operating margin during fiscal Q3.

This comes despite a rapid decline in COVID-19 hospitalizations following the winter surge. Officials said the impacts of the challenges will be widespread.

"The challenges we face are significant," said Dr. Anne Klibanski, president and CEO of Mass General Brigham. "The national labor shortage continues, leading to higher costs and contributing to ongoing severe capacity constraints. We are focused on navigating current market dynamics while planning for the future, transforming our organization to deliver services as a single integrated system and enabling our patients to easily access the full continuum of care that we provide."

Mass General Brigham reported a loss from operations of $120 million (-2.8% operating margin) for the third quarter, which ended June 30. Provider activity resulted in a loss of $121 million (-3.0% operating margin) and insurance activity generated income of $1 million (0.3% operating margin).

The system generated total operating revenue of $4.3 billion in the quarter. Higher inpatient acuity, along with longer lengths of stay at Mass General Brigham's academic and community hospitals, resulted in a decline in discharges (-5%) and slowed patient care revenue growth ($37 million or 1%) over the 2021 third quarter to $3 billion. The average acute care length of stay exceeded six days, a level that was not surpassed during COVID-19 surges in prior years, and roughly 15% longer than the average length of stay before COVID-19, increasing overall resource use per patient.

The system also generated $238 million in premium revenue (an 8% increase), $643 million in research revenue (10% increase) and $338 million in other revenue (22% increase). Operating expenses totaled $4.4 billion, an increase of $424 million (11%) over the 2021 third quarter, and remain elevated due to increases in wages (11%), employee benefit costs (10%) and clinical supplies (8%).

WHAT'S THE IMPACT?

The system reported a loss from operations of $303 million (-2.4% operating margin) for the nine-month period ending June 30. This includes losses of $288 million (-2.4% operating margin) from provider activity and $15 million (-2.0% operating margin) from insurance activity. Operating performance in fiscal year 2022 has been impacted by the Omicron surge, particularly during the March quarter, along with pressure on the cost of supplies and labor, which has limited systemwide inpatient capacity.

In the comparable prior year period, the system reported income from operations of $508 million. This includes $232 million of permanent grants from the CARES Act to reimburse the system for COVID-19 pandemic activity that occurred in 2020, and $30 million Affordable Care Act risk corridor program subsidies for insurance coverage provided in 2014-2016. Excluding these funds, operating income was $246 million (2.1% operating margin), including income from provider activity of $270 million (2.4% operating margin) and a loss from insurance activity of $24 million (-3.4% operating margin).

For the nine months ending June 30, the system absorbed $1.6 billion in Medicare, Medicaid and Health Safety Net shortfalls due to certain government reimbursements that don't cover the full cost of providing care to Medicare, low-income and uninsured patients – an increase of $187 million (13%) compared to the shortfall absorbed in the comparable prior year period.

The system reported an overall loss of $1.7 billion for that nine-month period, including a nonoperating loss of $1.4 billion. Nonoperating activity includes gains and losses on investments and interest rate swaps, which can vary significantly year to year due to volatility in the financial markets, and philanthropic activity. In the comparable 2021 nine-month period, the system reported an overall gain of $2.9 billion, including a nonoperating gain of $2.4 billion.

THE LARGER TREND

Despite rough financial waters, Mass General Brigham highlighted some positive trends, such as its efforts to expand home-based care due to accelerating demand brought by the pandemic.

The system also launched the Climate and Sustainability Leadership Council earlier this year. Its purpose is to develop systemwide goals in three principal areas: eliminating healthcare's contribution to climate change and pollution, promoting health equity through environmental justice, and transforming climate and sustainability through research and education. 

Initiatives to date include integrating climate health and healthcare sustainability into resident training, minimizing food waste as part of the Cool Food Pledge, and designing carbon-neutral buildings.

Massachusetts General Hospital and Brigham and Women's Hospital, the founding members of Mass General Brigham, once again ranked on the U.S. News & World Report Best Hospital Honor Roll among the top hospitals in the country this year.

Twitter: @JELagasse
Email the writer: jeff.lagasse@himssmedia.com