McLaren operating profit slips 20% in FY Q1

McLaren Health Care posted $20.9 million operating income for the fiscal first quarter ended Dec. 31, a 20% drop from the $26.1 million recorded during the same period in 2022, according to financial documents published Feb. 14.

The Grand Blanc, Mich.-based health system attributed the decline in operating performance to labor challenges, expense inflation and inpatient volumes that have not returned to pre-pandemic levels. 

McLaren said it continues to see increased levels of contract labor, incentives and premium pay compared to pre-pandemic levels. Its utilization of contract labor and premium pay to meet staffing needs continues to be a major focus, but the system is investigating alternative care models to reduce the financial burden of contract labor.

First-quarter revenue increased 3.6% year over year to $1.67 billion while expenses rose 4% to $1.64 billion. 

McLaren recorded premium revenue of about $773.8 million for the quarter, up 2.5% from the prior-year period due to increases in premium rates that offset a year-over-year decrease in membership. The system saw a $25.7 million increase in salaries and wages and employee benefits and payroll taxes, which increased 5% and 11.5%, respectively. The increases are mainly the result of pay increases and additional physicians onboarded in 2023.

After accounting for nonoperating items such as investment returns, McLaren ended the quarter with a net gain of $181.3 million, down slightly from the $183.8 million it reported during the same period in 2022.

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