Health system continues to build the integrated academic health system of the future
Mass General Brigham reported a loss from operations of $6 million (-0.1% operating margin) for the second quarter of fiscal year 2023, which ended on March 31, 2023. This includes losses from provider activity of $5 million (-0.1% operating margin) and insurance activity of $1 million (-0.3% operating margin).
In the second quarter of fiscal year 2022, which was impacted by the Omicron surge and temporary reductions in certain elective procedures, the health system reported a loss from operations of $193 million (-4.8% operating margin), including losses from provider activity of $183 million (-4.8% operating margin) and insurance activity of $10 million (-4.0% operating margin).
Patient services utilization rebounded as the Omicron surge subsided and remains robust; however, the labor and supply cost pressures that began to intensify last spring, including cost inflation and workforce vacancies that contributed to a severe capacity crisis, continue to impact operating performance. Efforts to utilize systemwide capacity more efficiently, advance clinical and administrative integration, and achieve operational cost reductions are driving improved financial performance and will ensure Mass General Brigham’s long-term sustainable future.
“We are beginning to see financial improvement at Mass General Brigham because of our efforts to position the system for long-term financial stability and preserve our ability to fund our mission. We are strategically investing in the system’s future, including advancing integration initiatives, growing research and breakthrough innovations, supporting and retaining our workforce, adopting new technology to reduce burnout, and lowering costs without impact to patient care,” said Anne Klibanski, MD, President and CEO of Mass General Brigham. “Healthcare has experienced foundational change in the last several years. Inflation, labor shortages, and a persistent capacity crisis continue to negatively impact health systems nationwide. While we are making progress on our transformation as a system, we will continue to face these external pressures which will limit our ability to drive advancements in health for our patients, communities and the world.”
The system generated total operating revenue of $4.5 billion in the second quarter of fiscal year 2023. Patient care revenue grew to $3.2 billion, an increase of $318 million (11%) over the 2022 second quarter when patient care activity was suppressed. While the average acute care length of stay was above 6 days for each quarter (approximately 15% higher than the pre-Covid average), ongoing efforts to coordinate systemwide capacity management contributed to the growth in discharges (6%) in 2023.
The system also generated $244 million in premium revenue (5% increase), $669 million in research revenue (9% increase) and $427 million in other revenue (25% increase). Operating expenses totaled $4.5 billion, an increase of $285 million (7%) over the 2022 second quarter and remain elevated due to increases in wages (6%, including ongoing use of temporary staffing), and costs and use of clinical (19%) and pharmaceutical (21%) supplies.
“We continue to focus on our ongoing clinical integration to improve patient care and identify efficiencies, in addition to promoting effective resource stewardship across the system to drive performance improvement,” said Niyum Gandhi, Chief Financial Officer and Treasurer at Mass General Brigham. “Clinical integration is already demonstrating important impacts for our patients, including through the newly established system behavioral and mental health coordination efforts that are addressing capacity constraints across our emergency departments and increasing access for patients in need of inpatient care. Through provider-payer integration with Mass General Brigham Health Plan, we are also developing programs within the Mass General Brigham Accountable Care Organization framework to improve access and health equity for underserved populations, delivering high-quality, coordinated care. We are dedicating significant energy to advance the system’s transformation and our mission of patient care, teaching and research, and our commitment to serving the community.”
A new report released by Mass General Brigham details the health system’s $53.4 billion impact on Massachusetts’ economy and communities. As the largest hospital system-based research enterprise in the country, Mass General Brigham is uniquely positioned to convene academic medical centers, university-based research, and cutting-edge biotech firms to create significant economic and health impacts. The exponential effect of this research enterprise is demonstrated by the creation of more than 300 spin-off health, biotech, and medical device companies — with over 130 based in Massachusetts.
Mass General Brigham continues to strategically invest in its future to grow research and breakthrough innovations. Additionally, the system is improving access for patients, making care more affordable and closer to home and advancing equity in clinical outcomes.
The system reported an overall gain of $361 million for the three months ended March 31, 2023, including a nonoperating gain of $367 million. 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 prior year period, the system reported an overall loss of $867 million, including a nonoperating loss of $674 million.
Year-to-Date Financial Results
The system reported a loss from operations of $8 million (-0.1% operating margin) for the six months ended March 31, 2023. This includes a $22 million permanent grant from the American Rescue Plan Act of 2021 (ARPA), the federal government’s economic stimulus bill intended to partially offset lost revenues and accelerate recovery from the COVID-19 pandemic, and $45 million in healthcare provider revenue related to prior year activity. Excluding these funds, the system reported an operating loss of $75 million (-0.9% operating margin), including losses from provider activity of $67 million (-0.8% operating margin) and insurance activity of $8 million (-1.7% operating margin).
In the comparable prior year period, the system reported a loss from operations of $183 million (-2.2% operating margin), including losses of $168 million (-2.2% operating margin) from provider activity and $15 million (-3.3% operating margin) from insurance activity.
For the six months ended March 31, 2023, the system absorbed $1.2 billion in Medicare, Medicaid, and Health Safety Net shortfalls due to certain government reimbursements that do not cover the full cost of providing care to Medicare, low-income, and uninsured patients, an increase of $108 million (10%) compared to the shortfall absorbed in the comparable prior year period.
The system reported an overall gain of $841 million for the six months ended March 31, 2023, including a nonoperating gain of $849 million. In the comparable 2022 six-month period the system reported an overall loss of $762 million, including a nonoperating loss of $579 million.
Mass General Brigham is an integrated academic health care system, uniting great minds to solve the hardest problems in medicine for our communities and the world. Mass General Brigham connects a full continuum of care across a system of academic medical centers, community and specialty hospitals, a health insurance plan, physician networks, community health centers, home care, and long-term care services. Mass General Brigham is a nonprofit organization committed to patient care, research, teaching, and service to the community. In addition, Mass General Brigham is one of the nation’s leading biomedical research organizations with several Harvard Medical School teaching hospitals. For more information, please visit massgeneralbrigham.org.