Mercy Health operating surplus plummets 76% after sale of insurance unit

Cincinnati-based Mercy Health's second-quarter results were rocky. The nonprofit system ended the second quarter with operating income of $10.3 million — a 76.3 percent drop from an operating surplus of $43.4 million in the second quarter of last year. 

Mercy reported operating revenues of $1.14 billion in the second quarter of 2016, up 5.9 percent from $1.07 billion in the same period of 2015. Mercy said the financial boost was attributable to year-over-year increases in acute care volumes. 

However, the system saw operating expenses rise 9 percent in the second quarter of 2016, outpacing the growth in revenue. The increase in expenses was primarily attributable to growth in labor and supplies costs, according to Mercy. 

In the first half of 2016, the system's revenue increased to $2.23 billion, up from $2.04 billion in the same period of the year prior. Although Mercy reported a gain from the sale of HealthSpan Partners, a health insurance company and physician group, the system's operating income fell 67.4 percent year over year to $20.38 million in the first half of this year.

The system's finances were also impacted by revenue cycle challenges due to "system conversions and implementations," according to Mercy. The system said management is making a number of changes to improve revenue cycle performance, including using resources to acquire Huntersville, N.C.-based Ensemble Health Partners, a revenue cycle firm, during the second quarter. 

Mercy ended the first half of 2016 with an operating margin of 0.9 percent.

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