SSM Health's operating income tumbles after St. Louis hospital acquisition

SSM Health, a nonprofit 20-hospital system based in St. Louis, saw revenue increase in 2016, but higher expenses due to the acquisition of Saint Louis University Hospital dragged down SSM's operating income.

According to recently released bondholder documents, SSM Health saw an 11.9 percent year-over-year increase in revenues. The system said revenues climbed to $6.1 billion in 2016, of which $299 million was attributable to its acquisition of Saint Louis University Hospital, which is now named SSM Health Saint Louis University Hospital.

St. Louis University acquired 365-bed SLU Hospital from Dallas-based Tenet Healthcare in 2015 and then transferred the hospital to SSM Health in exchange for a minority interest in SSM Health St. Louis.

Although SLU Hospital contributed to SSM's revenue boost in 2016, the hospital cost the system more than it earned. Last year, SSM Health's expenses increased 16.6 percent to $6.1 billion, of which $336.7 million was attributable to SLU Hospital.

SSM ended 2016 with operating income of $10 million, down 86.8 percent from operating income of $229.7 million in the year prior.

The system recorded an operating margin of 0.2 percent in 2016, compared to an operating margin of 4.2 percent in 2015. SSM said it is trying to increase its operating margin through cost reduction programs, revenue cycle improvements and integration and optimization of its acquisitions.

After factoring in nonoperating gains, SSM ended 2016 with net income of $99.4 million, down from $106.8 million in the year prior. 

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