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Federal aid and health plan spur ProMedica’s 10.8% Q2 margin

Not-for-profit ProMedica boosted its operating income by more than $200 million in the second quarter year-over-year, posting a margin similar to some for-profit hospitals that performed better at the height of the COVID-19 pandemic.

Toledo, Ohio-based ProMedica generated $189.4 million in operating income in the quarter ended June 30 on nearly $1.8 billion in revenue—a 10.8% margin. That’s compared with an $18 million operating loss on $1.7 billion in revenue in the 2019 period, a negative 1% margin. The dramatic swing was driven by federal stimulus grants and a particularly strong performance by its health plan, Paramount.

That’s a higher operating margin than California healthcare giant Kaiser Permanente’s 9.4% in the second quarter, and approaching for-profit Community Health Systems’ 11.8% operating margin in the quarter.

ProMedica draws strength from having a more diversified revenue base than traditional health systems, with 46% of revenue coming from its senior-care division. Almost 30% comes from its insurance division and 25% from its 12-hospital provider division.

Even as the provider side reported a 3.4% operating margin in the quarter, the system’s total margin was boosted by its insurance and senior-care divisions, which posted 15.8% and 11.6% margins, respectively.

Owning health plans proved to be a financial buffer for providers during the pandemic because members kept on paying premiums even as they put off procedures. ProMedica is a perfect example. The system paid 26% less in claims expenses in the second quarter year-over-year, and drew almost 3% more premium revenue.

Steve Cavanaugh, ProMedica’s chief financial officer, told Modern Healthcare recently he expects Paramount’s claims expenses will rise in the back half of the year as patients return. But in the first half, it was a “nice offset to the downward pressure in the acute business and senior-care business.”

Like other systems, ProMedica got a major boost from the CARES Act in the second quarter. Almost 14% of its second-quarter revenue—$238 million—was federal stimulus grants. More than 60% of the grant aid went to its senior-care division.

On the volumes front, ProMedica’s acute-care discharges were down 14% in the first half of the year compared with the 2019 period. Outpatient surgeries fell 27% in that time, and emergency department visits fell 22%. On the senior-care side, average daily census in ProMedica’s skilled-nursing facilities was down almost 10% in the first half of the year. Home health visits declined 23%.



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