PROVIDENCE, R.I. (WPRI) — Rhode Island’s two largest hospital groups both finished the fiscal year in the black thanks to tens of millions of dollars in federal coronavirus relief funding, newly released documents show.
Not-for-profit corporations Lifespan and Care New England — which are currently seeking regulatory approval to merge into one dominant hospital network — both this week reported their financial results for the 2020-21 fiscal year, which ended Sept. 30.
Lifespan’s operating income — the equivalent of an operating profit at a private company — was $89.1 million for the fiscal year, up from $55.1 million for the prior year. Annual net income, which includes non-operating revenue such as investment gains, jumped to $162 million.
Lifespan’s facilities include Rhode Island Hospital, The Miriam Hospital, Bradley Hospital and Newport Hospital. Its total revenue for the year was $2.8 billion, with patient-service revenue up by $186 million versus a year earlier.
Lifespan spokesperson Jane Bruno said the organization’s 3.4% operating margin for the 2020-21 fiscal year was “our best operating margin in more than a decade.” But she also noted that the group had benefited from $135 million in COVID relief funding during the 12-month period.
“Lifespan would not have been profitable on operations without the stimulus funds as we incurred meaningful expenses to operate through various virus surges and experienced material decline in patient volume and revenue which has been further exacerbated by the health care workforce shortage, as we don’t have enough staff to care for the patient demand,” Bruno said in an email.
“Lifespan has also incurred significant expenses to retain and recruit all levels of health care workers to address this historic health care staffing crisis,” Bruno added, with the cost of compensation and benefits rising 10% year over year. The organization budgeted $16.5 million in September for a “Thank You” bonus to employees.
Lifespan said it has received a total of $267 million in federal relief funding tied to the pandemic since March 2020, with about two-thirds provided by the U.S. Department of Health and Human Services and the remainder through the state’s federally funded Hospital Assistance Partnership Program. Federal loans were also provided.
Lifespan acquired Coastal Medical, a primary-care group, for $65 million last April. Rhode Island Hospital also paid $19.9 million for two office buildings owned by Coastal.
At Care New England, operating income for the fiscal year was $16.2 million, compared with an operating loss of $28 million for the prior year. Annual net income at CNE rose to $50.2 million, compared with a net loss of $13.2 million for the prior year. Salaries and wages were up 7.5%.
Care New England’s hospitals include Women & Infants, Kent and Butler. Its revenue for the year totaled $1.25 billion, including $77.5 million of coronavirus relief funds. Patient service revenue bounced back to $984 million, though that was still below the level in 2019.
Care New England spokesperson Jessica McCarthy highlighted the strengthened financial health of the group’s pension funds as “an improvement we are proud of.”
“If we look across the last two years there is a sense of breakeven there for CNE, and with everything that’s happened that isn’t something to ignore,” McCarthy said in an email. “Everyone is working extremely hard, and the resilience of our teams is incredible.”
Care New England said its mix of key revenue sources was little changed from last year, with 32% of patient costs paid by Medicare, 28% paid by Medicaid, and 22% paid by Blue Cross & Blue Shield of Rhode Island.
The two organizations’ annual financial filings don’t include details on executive compensation. But IRS filings for the prior fiscal year show Lifespan President and CEO Tim Babineau earned $3.2 million during the 12 months ended Sept. 30, 2020, while Care New England President and CEO James Fanale earned $1.5 million. Those figures include deferred compensation in addition to salary and benefits.
Attorney General Peter Neronha, the R.I. Department of Health and the Federal Trade Commission are currently reviewing the proposal by Lifespan and Care New England to join forces as one organization in partnership with Brown University. State regulators are due to make a decision by March; it’s unclear when federal officials will weigh in.
Ted Nesi (tnesi@wpri.com) is a Target 12 investigative reporter and 12 News politics/business editor. He co-hosts Newsmakers and writes Nesi’s Notes on Saturdays. Connect with him on Twitter, Threads and Facebook.