|Novant Health Reports 2011 Financials|
NC -- Novant Health, a not-for-profit healthcare system serving North
Carolina and three other surrounding states, reported net income of $1
million in 2011.
The health system's net income, also referred to as excess of revenues
over expenses, breaks down as follows: a positive operating income of
$20 million and investment income losses of $19 million.
In 2010, the health system recorded a net income of $158 million,
comprised of $65 million of operating income and $93 million in
investment income. Investment performance created the most significant
difference between the two years, decreasing by $112 million from 2010
Carl Armato, Novant Health's president and CEO, explained that the
health system focuses on four annual goals, one of which is financial.
The other three goals include the following: exceeding national
benchmarks in the quality of patient care, transforming the way
facilities and staff deliver care to improve a patient's and family's
experience, and transitioning to an electronic health record.
"At the start of last year, we initiated one of the most comprehensive,
complex and expensive projects in our health system's history," Armato
commented. "We began implementing an electronic health record in Novant
Medical Group physician clinics and we've started planning for the same
transformation in our 13 hospitals. The investment is a single patient
record and the infrastructure to support it is costly, but it's also the
right thing to do for the patients we serve - our electronic record
will contribute to safety, the quality of care, access to services and
improved communication between staff, physicians and patients."
Novant will spend $600-$700 million on its electronic health record
project over the next four years. Approximately 15% of the Novant
Medical Group clinics heave made the transition to the new electronic
health record and the other locations will complete their transition
between now and the summer of 2013. Novant leaders estimate that the
first group of hospitals will convert in late 2013 and the process will
continue through 2015.
Novant Health hired an additional 60 employees in 2011 to support the
conversion to an electronic health record in the physician clinics. Now,
as the planning begins for converting the hospitals to a paperless
medical record, Novant is recruiting for an additional 300 job openings
to support the system-wide conversion at the hospitals. Overall, the
health system is currently recruiting for approximately 1,700 positions,
based upon routine openings and the new positions.
Armato explained that Novant Health is devoting a lot of resources to
not only improving the quality and safety of care, but to lead the
nation. "Our patients and communities deserve that aspiration and I'm
proud of what our physicians and staff have accomplished," he commented.
For instance, Novant hospitals participate in the nation's inpatient
quality public reporting program, which includes 35 separate clinical
measurements per hospital ranging from heart disease to surgery to
pneumonia care. The U.S. Department of Health and Human Services
publishes the comparative database online at
www.hospitalcompare.hhs.gov. In 2011, Novant hospitals and their quality
measurements ranked in the top 10 percent nationwide, 86 percent of the
time. "We've maintained a relentless focus and made significant
investment in leading the nation in providing quality healthcare,"
Armato continued. "We believe these efforts will also strengthen our
organization's finances during an era where everyone is demanding that
healthcare services become more affordable."
Fred Hargett, chief financial officer of Novant Health, explained that
the organization is financing its larger projects, such as the
electronic health record conversion and transforming care at the
bedside, with operating cash rather than with borrowed funds. Novant
began this approach during the peak of the recession in 2009.
"Before the country's economic downturn, we funded many of our capital
projects by issuing debt or, simply put, by borrowing money," Hargett
explained. "Now we rely more heavily on utilizing our cash flow from
daily operations and, as a result, we are borrowing less. We're a large
organization that can fund major expenses with operating cash, which
long-term can save money be not incurring unnecessary debt expense."
Novant Health finished construction of and opened two new hospitals in
2011: Kernersville Medical Center in Kernersville, NC; and Brunswick
Novant Medical Center in Bolivia, NC, which replaced an older hospital.
Both of those projects required a more intense utilization of resources,
Hargett commented, including information technology, facility planning,
moving services and construction expenses.
The slow economy and high unemployment continued to impact revenue in
2011 as it has in other recent years. Hargett explained that Novant
facilities provide charity care to uninsured patients who qualify for
the health system's financial assistance programs. The cost to provide
that free care rose 5 percent from 2010 to 2011. Over the last five
years, charity care has doubled at Novant facilities. In addition, bad
debt expense at Novant facilities increased 5 percent from 2010 to 2011
and a total of 1½ fold during the past five year.
Overall, Novant Health provided $567 million of total community benefit
in 2011, which includes charity care, community outreach, support of
free medical clinics for the uninsured and poor, unfunded care by state
Medicaid programs and Medicare, and other expenses.
Hargett explained that another factor lowered the organization's income
in 2011. A one-time, non-cash adjustment in the system's financial
statements decreased 2011 net income by $44 million. The adjustment
related to a transaction that occurred in 2009 when the health system
restructured its partnership with Health Management Associates (HMA)
that involved Novant's partial ownership of HMA's seven hospitals in
North Carolina and South Carolina. The adjustment was a re-evaluation of
the partnership's accounting value to Novant Health.
The federal Medicare program for seniors continues to reduce payments to
hospitals and divert those funds to help pay for the health reform law
and its insurance expansion. Medicare is implementing annual cuts to
hospitals for 10 consecutive years to help pay for insurance expansion.
The second year of those decreases began in October, 2011. In addition,
the North Carolina state Medicaid program decreased reimbursements in
2011 to healthcare providers by 8 percent.
A similar pattern continued in 2011 regarding people's utilization of
healthcare services. During the peak of the recession, people cut back
on their use of certain services including outpatient surgery primarily
attributed to deferrals of elective procedures, and diagnostic imaging
such as MRI and CT scans, due mainly to higher deductibles in insurance
plans. Both of those service areas experienced 2-3 percent decreases
last year compared to the previous year. On the other hand, physician
clinic visits, emergency room visits and general outpatient activity
increased from 2-4 percent from 2010 to 2011.
Novant Health Financial Results
| Operating Revenues
| Operating Income
| Investment Earnings & Other
| Net Income
Posted on Monday, April 02, 2012 (Archive on Tuesday, April 02, 2013)
Posted by cc0245 Contributed by cc0245