Portland, Ore.-based Legacy Health recorded an operating loss of $7.1 million (-0.8% operating margin) during the second quarter of fiscal 2027, which ended Sept. 30, compared to an operating loss of $28 million (-3.5% margin) during the same quarter last year, according to its Nov. 6 financial report.
Six things to know:
1. Total operating revenue increased 9.5% year over year to $876.8 million in the second quarter. Net patient service revenue rose 7.8% to $796.8 million, which Legacy attributed to favorable volumes, higher acuity, reimbursement and outpatient revenue, partially offset by a decline in commercial payer mix.
2. Total operating expenses increased 6.7% year over year to $884 million. Wages, salaries and benefits rose 5.7% to $522.3 million, which Legacy attributed to higher volumes, rate increases and higher benefit costs. Supply expenses rose 11.7% to $143.9 million, with $11.4 million of the increase coming from pharmaceutical costs. Purchased services increased 18% to $69.9 million, driven by higher information systems, data processing, lab and medical service costs.
3. Discharges increased 4.7% year over year to 15,418, and adjusted discharges increased 7.9% to 37,044. Emergency room visits rose 4.7% to 89,255, and clinic visits grew 10.9% to 492,434. Patient days fell 1.2% and surgical cases declined 0.5%, as inpatient surgeries dropped 4.9% and outpatient surgeries rose 1.3%.
4. Legacy drew $100 million on its line of credit in the first quarter of fiscal 2027 because payer negotiations led to a large volume of held patient claims. Those claims were released in the second quarter. The system drew an additional $10 million and repaid $60 million during the quarter, leaving $50 million outstanding as of Sept. 30.
5. About 70% of Legacy’s patient volume is covered by government payers, where reimbursement growth has lagged cost inflation. The system cited three other pressures: higher labor costs tied to Oregon’s HB 2697 staffing requirements and a rapid increase in unionization over the past two years; a decline in commercial coverage after changes to ACA marketplace subsidies; and increased uncompensated care under Oregon’s HB 3320. Legacy said contract labor use and average length of stay fell to five-year lows.
6. Legacy reported net income of $51.6 million in the second quarter of fiscal 2027, up from $12.3 million during the same period last year. The improvement reflected a narrower operating loss and a $72.3 million gain from the sale of medical office buildings, partially offset by a $16.4 million investment loss, compared to $34 million in investment income a year earlier.
