Mass General Brigham continues to experience significant financial pressures driven by a widespread labor shortage, historic cost inflation and the enduring capacity crisis, despite a rapid decline in COVID-19 hospitalizations following the winter surge. While the impacts of these challenges are widespread, Mass General Brigham remains committed to transforming care delivery, making it more affordable while improving outcomes for our patients.
“The challenges we face are significant. The national labor shortage continues, leading to higher costs and contributing to ongoing severe capacity constraints,” said Anne Klibanski, MD, President and CEO of Mass General Brigham. “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. We are shaping new treatments, procedures, and delivery methods, meeting patient needs as they evolve, and making care more affordable. The progress we are making is thanks to our employees who, despite extraordinary difficulties in recent years, show their dedication each day toward our mission to provide world-class care to the patients and communities we serve.”
Mass General Brigham reported a loss from operations of $120 million (-2.8% operating margin) for the third quarter which ended June 30, 2022. 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 2022 third quarter. Higher inpatient acuity coupled with longer lengths of stay at Mass General Brigham’s academic and community hospitals resulted in a decline in discharges (-5%) and curtailed patient care revenue growth ($37 million or 1%) over the 2021 third quarter to $3.0 billion. The average acute care length of stay exceeded 6 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 (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%, reflecting continued high use and cost of temporary staffing as well as market wage adjustments to facilitate workforce retention), employee benefit costs (10%) and clinical supplies (8%).
“Despite the rapid decline of the winter Omicron surge, we continue to face various and persistent challenges. Staffing shortages have led to higher labor costs while exacerbating the strain on systemwide inpatient capacity,” said Niyum Gandhi, Chief Financial Officer and Treasurer at Mass General Brigham. “As these challenges are unlikely to subside in the near term, we must continue and even accelerate our efforts to improve efficiency, deliver care in the most appropriate and convenient settings, and integrate payer and provider capabilities to improve affordability for individuals and employers.”
In the comparable 2021 quarter, the system reported operating income of $128 million (3.1% operating margin). This included $135 million income from provider activity (3.5% operating margin) and a loss from insurance activity of $7 million (-2.9% operating margin).
Demand for home-based care and home hospital offerings has accelerated due to the pandemic and the evolving needs of our community. Mass General Brigham is expanding capacity for home-based care to improve access and value for our patients. Shifting the site of healthcare to the home and scaling home-based care will meaningfully decrease healthcare expenditures while affording additional benefits to patients through an improved patient experience, including the ability to be surrounded by family and friends and be more active in the comfort of a home setting. Research shows that home-based care can provide more patient-centered and satisfying care, lower complication rates, reduce Emergency Department utilization and lead to improved patient outcomes for patients who can safely be transitioned out of a hospital setting. It also results in fewer readmissions, one of several ways Mass General Brigham is addressing the ongoing hospital capacity crisis.
AllWays Health Partners will change its name to Mass General Brigham Health Plan as of January 1, 2023. An integrated brand identity advances Mass General Brigham’s unified system strategy and supports its value-based care goals. The system’s unique provider-payer integration fosters collaborative innovations that can simultaneously lower costs and improve care. For example, Mass General Brigham is exploring opportunities to expand risk-based arrangements that support MassHealth population to access to high-quality care through population health interventions and coordinated primary care.
The health sector is responsible for approximately 8.5% of carbon emissions in the United States, which are the leading cause of global climate change. Acknowledging the important intersections between climate change, human health, and health care delivery, Mass General Brigham launched the Climate and Sustainability Leadership Council earlier this year. Its purpose is to develop systemwide goals in three principal areas: eliminating our 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 health care sustainability into resident training, minimizing food waste as part of the Cool Food Pledge, and designing carbon neutral buildings. In fact, Mass General Brigham has already reduced greenhouse gas emissions from energy by roughly 60% since 2008. In May, Mass General Brigham’s leadership in sustainable healthcare delivery was acknowledged by the Environmental League of Massachusetts with the Commonwealth Environmental Leadership Award. In July, Mass General Brigham committed to meet the Biden administration’s climate goal of reducing emissions by 50% by 2030 and achieving net zero emissions by 2050.
During the third quarter of fiscal year 2022, Mass General Brigham continued to distribute grants that comprise its $50 million commitment to fund new, comprehensive community and mental health strategies. This includes a grant to support a new partnership with the Greater Boston Chinese Golden Age Center (GBCGAC) that will enhance mental health services and reduce health disparities for Asian adults and senior. Through the partnership, GBCGAC will expand both the number of community health workers delivering linguistically appropriate mental health services and the number of participants in the program. By providing transformative grants to community partners throughout the region, Mass General Brigham is building a strong foundation to drive lasting change for our patients and the communities we serve, establishing a culture of health equity improvement required to meet today’s healthcare challenges. These community grants build upon Mass General Brigham’s existing $175 million annual community health investment program.
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. Additionally, Brigham and Women’s Hospital ranked No. 1 for obstetrics and gynecology in the nation and three Mass General Brigham specialty hospitals were recognized for national excellence: McLean Hospital ranked No. 1 in the nation in psychiatry; Spaulding Rehabilitation ranked No. 1 in rehabilitation in New England and No. 3 in rehabilitation in the nation; and Mass Eye and Ear ranked No. 1 for otolaryngology (ear, nose, and throat care) and ophthalmology in New England and No. 4 for both otolaryngology and ophthalmology in the nation.
The system reported an overall loss of $949 million in the third quarter of 2022. This includes a nonoperating loss of $829 million, reflecting heightened unfavorable volatility in the financial markets. In the comparable 2021 period, the system reported an overall gain of $870 million, including a nonoperating gain of $742 million during a period of heightened favorable volatility in the financial markets.
The system reported a loss from operations of $303 million (-2.4% operating margin) for nine months ended June 30, 2022. 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 unrelenting 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 Provider Relief Fund of the Coronavirus Aid Relief and Economic Security (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 ended June 30, 2022, the system absorbed $1.6 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 $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 the nine months ended June 30, 2022, 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.
This press release contains certain “forward-looking statements” concerning financial and operating plans and results which involve known and unknown risks and uncertainties. In particular, statements preceded or followed by, or that include the words, “projects,” “believes,” “expects,” “estimates,” “anticipates,” “plans,” “intends,” “scheduled,” or similar expressions are forward-looking statements. Various factors could cause Mass General Brigham’ actual results to differ materially including, but not limited to the impact of the COVID-19 pandemic, federal and state regulation of healthcare providers, changes in reimbursement policies of state and federal government and managed care organizations, competition in the healthcare industry in our market, general economic and capital market conditions, and changes in our labor and supply costs and in our ability to retain personnel. For more information on these and other risk factors, please refer to our most recent bond official statement or annual disclosure statement filed on the Electronic Municipal Market Access (EMMA) website maintained by the Municipal Securities Rulemaking Board. We undertake no responsibility to update any such forward-looking statements except as expressly required by law.
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.