Advocate Health Care looks to cut costs after Q1 revenue falls below budget target

Downers Grove, Ill.-based Advocate Health Care's financial picture improved year over year in the first quarter of 2017, but the 11-hospital system is putting a cost-cutting plan into place to protect its future financial performance. 

Advocate recorded revenues of $1.56 billion in the first quarter of this year, up 18 percent from revenues of $1.37 billion in the same period of 2016, according to recently released bondholder documents.

Advocate's revenue was up year over year in the first quarter of 2017, but its first quarter revenue fell $70 million shy of what was budgeted. To keep its financial performance from suffering as reimbursement from government and commercial payers continues to decline, Advocate plans to make $200 million in cuts.

In a memo sent to employees earlier this month, Advocate President and CEO Jim Skogsbergh said the system's first quarter financial performance "brought into sharp focus what we know to be true … our existing cost structure is not sustainable," according to the Chicago Tribune. Although Advocate is still evaluating where cuts will be made, Mr. Skogsbergh's memo to employees said the cuts "will undoubtedly impact programs, services and jobs."

After factoring in a 13 percent year-over-year increase in expenses, Advocate ended the first quarter of 2017 with an operating income of $49.24 million, up from $41.62 million in the same quarter of last year.

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