Texas Children's operating income falls 62% as health plan costs grow

Texas Children's Hospital saw revenue increase 5.3 percent year over year to nearly $3 billion in fiscal year 2016, but the Houston-based hospital saw its operating surplus decline, according to recently released bondholder documents

Texas Children's reported an operating income of $45.6 million in FY 2016, down 62 percent from $120.2 million in the year prior. 

The hospital's sagging financials in FY 2016 are attributable, in part, to a $13.7 million operating loss on Texas Children's Health Plan. Although Texas Children's saw a year-over-year increase in health plan membership, the hospital incurred additional costs of $9.1 million in the 12 months that ended Sept. 30 in preparation for STAR Kids — a Medicaid managed care program that launched Nov. 1.

Texas Children's Health Plan is expected to gain about 40,000 new members over time through STAR Kids. The hospital said it hired more than 400 employees to facilitate and manage the program.

After accounting for $97.9 million in nonoperating gains, Texas Children's ended FY 2016 with a net surplus of $143.5 million, up from $44.6 million in the year prior.

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Editor's Note: This story was updated Dec. 15. 

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