One large health system relied on these investment gains to stay in the black in 2021 as they saw a negative operating margin.
Renton, Wash.-based Providence ended 2021 with an operating loss of $714 million, despite Providence reporting a 6 percent revenue gain in 2021. However, the 52-hospital system offset its operating loss with nonoperating income of $1.2 billion in 2021. Providence ended 2021 with a net income of $518 million.
Other health systems still recorded operating gains, but attributed a large portion of their net income to nonoperating activities.
Oakland, Calif.-based Kaiser Permanente recorded a net income of $8.1 billion in 2021, an increase of $1.7 billion from 2020. The sharp rise in net income from the integrated delivery system with 39 hospitals was mainly driven by $7.5 billion in other income, including investment gains. A smaller portion of the net income was driven by an operating income of $611 million in 2021. For comparison, in 2020 Kaiser’s operating income was $2.2 billion and nonoperating income was $4.1 billion.
Other health systems, including Cleveland Clinic, Pittsburgh-based UPMC and Indianapolis-based IU Health, saw this trend as well.
Cleveland Clinic saw its net income increase 67 percent in 2021 to $2.2 billion, driven by investment gains of $1.4 billion and an operating income of $746.3 million.
IU Health saw its operating income fall 75 percent to $161 million in 2021 when compared to 2020. However, gains from investments and other nonoperating activities reached $861.5 million in 2021.
Additionally, when compared to 2020, Pittsburgh-based UPMC also saw its operating income drop $35 million to $843 million in 2020. The health system recorded nonoperating gains of $810 million in 2021, bringing its net income to $1.5 billion. In 2020, UPMC saw nonoperating gains of $232 million and ended with a net income of $1.1 billion.
Similarly, health systems that reported quarterly results in the three months ending Dec. 31, 2021, saw the same results.
For example, Chicago-based CommonSpirit recorded an operating loss of $81 million in the three-month period ended Dec. 31, compared to operating income of $363 million in the same period a year earlier. But, driven by investment gains and other nonoperating items, CommonSpirit closed out the second quarter of fiscal year 2022 with a net income of $118 million. In the same period of 2020, the health system reported net income of $1.9 billion.
St. Louis-based Ascension saw its operating margin fall below 1 percent in the three months ending Dec. 31, 2021. The 142-hospital system recorded an operating income of $61,400 in the second quarter of fiscal year 2022 while posting overall revenue of $7.3 billion. After factoring in strong nonoperating gains, including $1 billion from investments, Ascension posted a net income of $949.5 million in the three months ending Dec. 31.
Boston-based Mass General Brigham also recorded a narrow operating margin of 0.2 percent, or $10.1 million, in the three months ending Dec. 31, 2021, but posted a net income of $105 million thanks to nonoperating gains of $94.9 million.
