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Novant Health reports 2015 audited financial results


Winston-Salem, N.C., March 29, 2016 – Novant Health today announced the 2015 audited financial results for the not-for-profit health care system. For 2015, the system reported a net income of $191.6 million on operating revenue of $4.1 billion. The system also reported a community benefit of $706.3 million, including $125.3 million of direct charity care.

Fiscal year 2015 net income, also referred to as excess of revenues over expenses, is comprised of $258.4 million of operating income and investment loss of $60.0 million. Novant Health leaders attribute the increase in operating income to a higher number of physician encounters and improved patient access through expanded service offerings. The 2015 results compare to operating income of $166.9 million and investment income of $38.9 million in 2014.

Carl S. Armato, president and CEO of Novant Health, commented that the organization made significant gains to open access to quality health care at affordable price points across the system.

"In 2015, Novant Health focused on increasing patient access to quality health care,” Armato said. "By opening new primary care clinics, urgent care and express clinics, as well as expanding clinic hours and increasing e-visits and video visits, patients benefited from choices for their health care needs. Novant Health is focused on meeting the needs of today’s health care consumer and offering affordable options for care across a variety of settings.”

Fulfilling the mission through community benefit
As a not-for-profit health care system, Novant Health is committed to its mission to improve the health of the communities it serves, regardless of a patient’s ability to pay. In 2015, Novant Health provided more than $706 million of community benefit, up from $639 million in 2014. The benefit includes more than $125 million in charity (free) care to uninsured and indigent patients.

Novant Health’s community benefit includes hundreds of programs, such as unreimbursed health services to individuals with Medicaid and Medicare coverage; community health education; support groups; partnerships with other organizations to provide outreach services; community events and screenings; and participation in medical research and academic health programs.

In 2015, the unreimbursed costs to provide health care services to Medicare and Medicaid patients were about $389 million and $105 million, respectively.

Bad debt, which is not included in community benefit reporting, remained flat at $196.0 million.

Similar to 2014, Novant Health continued to see a slight reduction in self-paying patients. As the Health Insurance Marketplace entered its second year, more patients are covered under managed care plans.

Patient volumes saw a significant shift to outpatient and primary care as patients are more proactively managing their health. Inpatient volumes were flat, while primary care visits were up 9 percent from 2014.

Investing in capital improvements, expanded health care offerings
In 2015, Novant Health continued its rollout of the electronic health record (EHR), investing $35 million in the ongoing project. Three medical centers were converted from paper-based records to the EHR in 2015, including Novant Health Rowan Medical Center, Novant Health Brunswick Medical Center and Novant Health Thomasville Medical Center. The organization previously converted eight medical centers and more than 420 physician clinics to electronic health records.

Also in 2015, the first systemwide upgrade to the electronic health record was implemented and the organization successfully transitioned to ICD-10 – a revised coding system that tracks many new diagnoses.

In all, the organization invested more than $226 million in capital for construction projects, routine equipment replacements at facilities and technology. Investments included the multiyear facility improvement project at Novant Health Prince William Medical Center and the construction of a new bed tower at Novant Health Clemmons Medical Center. The tower is scheduled to open in 2017.

Additionally, Novant Health expanded care offerings by opening new urgent and express care clinics in nearly all markets. Express care clinics offer convenient walk-in care, with extended weekday and weekend hours, and treat common illnesses and minor injuries.

Fred Hargett, chief financial officer for Novant Health, commented that in spite of a difficult market in a slowly growing economy, continued investments in quality health care offerings are a focus for the organization.

"Novant Health continued to expand access to quality health care in our communities with new offerings in settings other than the hospital,” Hargett said. “Our operating income directly funds reinvestment into our operations. With continued pressures on reimbursement, opening new access points for patients at an affordable price is imperative. We are meeting patients where they are with new offerings and expanded hours of operation. ”

Partnering for the future
In 2015, Novant Health announced the intent to form a joint operating company with UVA Health System in Northern Virginia. Under the agreement, Novant Health’s Virginia operations — including Novant Health Haymarket Medical Center, Novant Health Prince William Medical Center, Novant Health Caton Merchant House, Novant Health Cancer Center and Novant Health medical group clinics — joined UVA Culpeper Hospital to form the regional health system. The new system began official operations Jan. 1, 2016.

Armato commented that the joint operating company creates access to quality health care through partnership.

“Consumers have choices in today’s health care environment and will challenge our system to meet them with health care where they are, when they want it, and at a price they can afford,” said Armato. “We continue to find unique ways to partner in health care to provide the best care to our communities. The newly formed Novant Health UVA Health System in Northern Virginia is dedicated to giving patients access to high-quality, accessible, patient-centered care close to home.

“This new joint operating company brings the benefits of subspecialty care and clinical trials from UVA Health System and Novant Health’s experience with increasing access to care when and where patients need it to local communities.”

Quality and safety; bundled payments for care improvement
Novant Health facilities participate in state and national quality public reporting programs and consistently rank as national leaders.

“Novant Health welcomes transparent reporting of our quality and safety, and we are extremely proud of our position as leaders in these indicators,” Armato said. “Each of our facilities is reported in the top 10 percent in quality and top 25 percent in safety nationally.”

In 2015, Novant Health was among the more than 300 health care organizations that applied for a three-year Bundled Payments for Care Improvement agreement with the Centers for Medicare and Medicaid Services. This pilot program is testing how bundled payments for clinical episodes can result in better care, smarter spending and quality outcomes.

As a part of the pilot program, Novant Health applied for bundled payment models for joint replacement, pneumonia and congestive heart failure. The bundles include acute and post-acute care provided over a 90-day period, including hospital readmissions.

Financial summary

(in millions of dollars)

2015

2014

Operating revenues

$4,128.0

$3,787.9

Operating expenses

$3,869.6

$3,621.0

Operating income

$258.4

$166.9

Investment income (loss)

($60.0)

$39.0

Other nonoperating expense

($6.8)

($4.1)

Net income

$191.6

$201.8

Posted on Tuesday, March 29, 2016
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