Duluth, Minn.-based Essentia Health reported a 1.2% operating margin in fiscal 2026, down from 2.2% a year earlier, as expenses outpaced revenue growth ahead of its proposed merger with Bloomington, Minn.-based HealthPartners.
Essentia reported $42.3 million in operating income for the fiscal year ended June 30, down 41% from $71.6 million in fiscal 2025, according to its Oct. 14 audited financial report.
Operating revenue increased 6.4% year over year to $3.49 billion, while operating expenses rose 7.5% to $3.45 billion. Patient service revenue grew 7.1% to $3.41 billion, driven primarily by outpatient revenue, which increased from $2.48 billion to $2.67 billion. Inpatient revenue rose from $673 million to $702 million. Salaries, wages and benefits increased 6.3% to $2.02 billion, while supply expenses climbed 11.4% to $809.5 million.
Essentia reported $281.8 million in nonoperating gains, up from $169 million in fiscal 2025, driven largely by investment gains. The system posted a $324 million in net income, compared with $241 million a year earlier.
The financial results come as Essentia prepares to combine with HealthPartners, which reported an operating loss of about 1% on $9.3 billion in revenue in 2025. HealthPartners cited rising medical and pharmacy costs, including an 11% increase in medical trend, and reported more than $4.1 billion in claims payments.
The two organizations announced Sept. 29 that their boards approved an affiliation agreement to create a 22-hospital nonprofit system with more than 135 clinics, 6,000 clinicians and approximately 45,000 employees.
The transaction is expected to take effect Jan. 1, pending regulatory approvals.
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