Dana-Farber records $34.9M operating loss in first 9 months of FY 2017

Ayla Ellison -

Dana-Farber Cancer Institute saw revenue increase year over year in first nine months of fiscal year 2017, but the Boston-based cancer hospital ended the period with an operating loss.

Dana-Farber recorded revenues of $1.1 billion in the first nine months of fiscal year 2017, up 8.6 percent from the same period of fiscal year 2016, according to recently released bondholder documents. The financial boost was largely attributable to increases in patient care revenue and research revenue, which climbed year over year by 6.2 percent and 15.8 percent, respectively.

However, higher expenses offset the hospital's revenue gains. In the first nine months of fiscal year 2017, Dana-Farber recorded operating expenses of $1.1 billion, a 14.4 percent increase from the same period of the year prior. The hospital said general administrative and plant expenses grew 6.6 percent year over year, which is primarily attributable to consulting and legal costs related to a CMS review.

At the direction of CMS, the Massachusetts Department of Public Health surveyed Dana-Farber Cancer Institute on Aug. 4, 2016. The survey revealed the hospital "was not in substantial compliance" with six Medicare rules, according to a letter CMS sent to Dana-Farber Aug. 23, 2016.

The hospital told Becker's Hospital Review in March most of the issues CMS identified were related to the "oversight and administration of care" provided in its 30-bed inpatient unit. Although Dana-Farber and Boston-based Brigham and Women's Hospital are independent organizations, Dana-Farber's inpatient unit is housed in Brigham and Women's. According to CMS, Dana-Farber violated Medicare rules by relying on Brigham and Women's to handle a number of processes, including verifying staff credentials and managing patient complaints.

Dana-Farber, which had until the end of June to correct the issues, submitted a plan to CMS to fix the problems. In its recently released financial documents, Dana-Farber said CMS and the Massachusetts Department of Public Health accepted its plan of correction, and notified the hospital June 12 it was in full compliance with Medicare rules.

In addition to the CMS review, higher interest expenses related to the issuance of Series N debt also affected Dana-Farber's revenue growth in the first nine months of fiscal year 2017.

Dana-Farber ended the first nine months of fiscal year 2017 with an operating loss of $34.9 million, compared to operating income of $21.4 million in the same period of fiscal year 2016.

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