Investment gains a main driver of health system profits in 2021

Many large health systems across the U.S. recorded strong profits in 2021 thanks to investment or other nonoperating gains. 

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. 

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