Monday, November 16, 2020
COVID-19 pandemic continues to put a strain on health system
Beaumont Health’s patient volumes, operating income and non-operating income rebounded better than expected, during a pandemic, throughout the third quarter of 2020. However, the effects of the pandemic will continue to affect the financial performance of the health system and the entire industry for the remainder of the year.
As of September 30, Beaumont’s net income was $61.2 million, a decrease of $197.4 million over the same period in 2019. Operating revenues fell to $3.29 billion, a $200.6 million decrease over the $3.49 billion reported at the end of the third quarter of 2019.
Net operating income, before other non-recurring expenses (such as restructuring charges, settlements, divestitures, etc.) for the first nine months of 2020 was $67.6 million (2.1% operating margin), a $63.4 million decrease from 2019’s net operating income of $131.0 million (3.8% operating margin). Non-operating income through the third quarter was $13.2 million, a $117.7 million decrease from the same period last year.
“While 2020 has been a challenging year for all health systems, we have taken steps to lead through the COVID-19 pandemic as well as position ourselves for the future. We have built inventories of personal protection equipment (PPE) to ensure our caregivers and physicians have the necessary supplies to safely practice medicine in our facilities, purchased the necessary supplies and equipment to successfully lead vaccination efforts in our communities and invested in our most important asset – our staff,” Beaumont Health Chief Financial Officer John Kerndl said. “In addition, Beaumont Employer Services has been handling on-going COVID-19 and antibody testing for 60 employers across the state, including some of the state’s largest employers.”
Beaumont also recognizes the year has been particularly challenging for staff and physicians. Last week, the health system announced it was providing a tax-free $1,000 recognition payment for full-time employees, increasing minimum wage to $15 per hour, making other related compensation adjustments and increasing the shift differential for nursing and some other positions. These enhancements build upon Beaumont’s ongoing focus to attract and retain high-quality talent, Beaumont will invest more than $140 million in its staff this year. Other initiatives that are part of the $140 million investment include:
- Offering a COVID-19 surge peak disaster relief recognition in April
- Restoring the 403(b) Match in September
- Reinstating our tuition reimbursement program
- Providing a general pay increase in October for the sixth consecutive year
- Freezing the costs of health care benefits for all employees for 2021 at the prior-year level, with Beaumont absorbing the additional cost
- Launching extensive staff retention and referral programs to recruit more staff as the system continues to rebound to normal operating levels.
While Beaumont has a strong balance sheet with liquidity to weather financial challenges, the system continues to work on recovery plans and has taken multiple steps to improve financial performance, such as:
- Pursuing all Federal and State programs including FEMA, CARES and other COVID-19 programs
- Evaluating all expenses and identifying ways to reduce expenses to align costs and current volume levels.
- Making a concerted effort since July to return furloughed employees back to work and seeking to hire new employees where volumes are growing rapidly.
Beaumont’s treasury indicators remain strong, primarily as a result of cash increases related to Medicare Advanced Payments of $504 million, CARES Act payments and deferred payroll taxes in the year. The treasury indicators as of September 30 are as follows:
- Cash and investments: $3.378 billion at the end of the third quarter for 2020, compared to $2.0 billion for the same period in 2019
- Unrestricted days cash on hand was 304.4 days in 2020 versus 174.1 days in 2019
- Total debt for 2020 was $1.47 billion compared to $1.53 billion for 2019