Among Health Systems Battling Financial Onslaught from COVID, Size Didn’t Matter

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STAMFORD – To promote fiscal well-being, hospitals, physician practices and other medical providers have spent a couple of decades consolidating into “health systems.”

But years of mergers and acquisitions may not be enough to inoculate them against coronavirus.

Connecticut’s largest system, Yale New Haven Health, recently announced it faces a $200 million deficit, citing elevated costs of labor, equipment and supplies brought on by a pandemic that also cut into revenue when elective procedures had to be suspended.

Yale New Haven Health has medical networks throughout Connecticut and in two neighboring states, and operates hospitals in New Haven, Bridgeport, Greenwich, New London and Westerly, R.I.

Beyond that, Yale New Haven Health, with nearly 29,000 employees and assets worth more than $8 billion, has filed an intent to acquire two other systems – Waterbury Health and Eastern Connecticut Health Network, which together have three hospitals.

But bigger didn’t always mean better-equipped to withstand coronavirus, according to the latest report from the state Office of Health Strategy, issued in December. 

The report covers fiscal year 2020 – Oct. 1, 2019 to Sept. 30, 2020. The pandemic began in January 2020.

During that time, the average profit margin for health systems statewide was .23 percent, down from 2.8 percent the previous year, according to the report. 

Yale New Haven Health’s margin was .68 percent, despite receiving $325 million in federal coronavirus relief funds, the report states. 

It’s unclear why Yale New Haven Health performed as it did, or how the hospitals it operates in Greenwich, Bridgeport and elsewhere will be affected by the $200 million shortfall. 

Requests for comment were not returned, except for Dana Marnane, vice president of public relations at Greenwich Hospital and director of public relations and communications for Yale New Haven Health Greenwich Hospital.

“Sorry – not sure we’ll be able to help,” Marnane wrote in an email.

Another large system in the state, Nuvance Health, which operates Norwalk and Danbury hospitals and five others in western Connecticut and Hudson Valley, N.Y., didn’t do as well as Yale New Haven. Nuvance came in with a .46 percent profit margin, according to the report.

Calls to Nuvance also were not returned.

Health system executives say adding hospitals, doctors’ groups, specialty services and geographic area increases efficiencies and lowers costs. Critics say the systems become monopolies that drive up prices for patients.

Media reports on the financial performance of the nation’s health systems are mixed. 

According to The Wall Street Journal, several of the largest ones logged “hundreds of millions of dollars in surpluses after accepting huge grants for pandemic relief.”

The New York Times reported that “billions of dollars in COVID aid cushioned financial losses caused by the pandemic at some of the nation’s largest hospital chains,” and “helped sustain the big chains’ spending sprees as they expanded even more by scooping up weakened competitors and doctors’ practices.”

But Moody’s Investors Service has set a negative outlook for health care because many nurses and other medical professionals have resigned out of stress, fatigue and overwork, and hospitals will have to offer higher wages to fill the shortage.

The health-care consulting firm Kaufman Hall projects upcoming reports will show income losses for more than a third of U.S. hospitals.

Among Connecticut’s 12 health systems, the best performer in fiscal 2020 was Trinity Health of New England, which operates three hospitals upstate and logged a profit margin of 6 percent. It’s part of Trinity Health, a chain that operates 88 hospitals in 21 states, according to its website.

The Trinity affiliate was followed by one of Connecticut’s seven independent health systems – smaller networks that have resisted mergers. 

Stamford Health, which operates Stamford Hospital, a medical group and a foundation, had a profit margin of 2.5 percent, nearly four times that earned by Yale New Haven Health, according to the report.

Independence is an advantage, said Michael Veillette, senior vice president of finance and chief financial officer for Stamford Health.

“It is not easy for a health system to remain independent in today’s environment, but we believe it is in our communities’ best interest. The support we’ve received from our community has allowed us to continually invest in programs and services that meet residents’ health-care needs,” Veillette said.

Several factors contributed to Stamford Health’s better-than-average performance in 2020, Veillette said.

“First and foremost, our independence helped us to be nimble and recover quickly from the most severe impacts of the initial Spring 2020 COVID surge, with patients returning for routine care and elective procedures more quickly than they did elsewhere,” he said. “Additionally, several one-time factors, generous philanthropic support and gains associated with long-term investments contributed to our relatively strong financial performance.”

Within health systems, hospitals are the hubs. The state report showed that 18 of Connecticut’s 27 hospitals earned more than they spent in fiscal 2020, but their profits, on average, were half what they were the previous year.

The escalated expenses of adding staff and beds, and buying high-demand equipment and supplies that became even more costly when the pandemic disrupted supply chains, were offset by a booming financial market that boosted hospital investment revenues by 393 percent, according to the report.

The Connecticut Office of Health Strategy’s next report, which will cover fiscal 2021, is due at the end of this year. 


Angela Carella

For 36 years prior to joining the Connecticut Examiner, Angela Carella was a beat reporter, investigative reporter, editor and columnist for the Stamford Advocate. Carella reports on Stamford and Fairfield County. T: 203 733-6811

a.carella@ctexaminer.com