CHI sees operating loss shrink as turnaround efforts take hold

Englewood, Colo.-based Catholic Health Initiatives saw its financial position significantly improve in the second quarter of fiscal year 2018.

CHI's revenues remained virtually flat year over year at $3.8 billion. However, the 101-hospital system's expenses declined in the second quarter of fiscal year 2018, which is rarely seen in today's healthcare environment.

CHI launched a performance improvement plan about three years ago, and the system has put a significant amount of energy into lowering labor and supply costs.

"Labor and supply are our two largest cost items, and we saw absolute reduction," says CHI President of Enterprise Business Lines and CFO Dean Swindle. Looking at the first six months of fiscal year 2018, the system reduced labor costs and supply costs by about $100 million and $30 million, respectively, year over year, he says.

In the second quarter of fiscal 2018, CHI's operating expenses totaled $3.8 billion, down slightly from $3.83 billion in the same period of the year prior. After factoring in restructuring, impairment and other one-time costs, the system ended the second quarter of fiscal year 2018 with an operating loss of $1.5 million. That was a significant improvement from the $146 million operating loss CHI reported in the second quarter of fiscal year 2017.

CHI operates hospitals and other healthcare facilities across 18 states, and the positive results for the second quarter were spread across virtually all of the system's markets.

CHI's operating results for the first quarter of fiscal year 2018 were negatively affected by Hurricane Harvey, which caused the temporary evacuation and closure of two of its facilities in Texas in late August. Due to a volume shortfall caused by the hurricane, CHI's Texas region took a $25.8 million hit in the first quarter. CHI's improved operating results for the second quarter of fiscal 2018 include insurance recoveries of $14.6 million related to the hurricane.

"We feel confident we will continue to see improvement in Texas through the remainder of this year," Mr. Swindle says.

Fueled by an increase in investment gains, CHI recorded a net surplus of $215.6 million in the second quarter of fiscal year 2018, up from a net loss of $24.5 million in the same period of the year prior.

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