Corewell Health’s financial performance improved during the first quarter as the health care industry nationwide showed signs of stabilizing from the higher labor costs for staff shortages and persistent inflation.
Grand Rapids- and Southfield-based Corewell Health recorded $102 million in net operating income for the first quarter on $3.7 billion in total operating revenue for a 2.8% operating margin.
That compares to $90.5 million in net operating income in the first quarter of 2022 on $3.11 billion in total operating income for a 2.9% operating margin. The results a year earlier included $43.8 million that Corewell Health received in federal and state pandemic-relief aid in the first three months of 2022.
“It’s just the first quarter, but we’re off to a good start, and as you compare that to other organizations across the country, there are many that are not in that same situation, although it’s getting better,” said CFO Matt Cox. “It seems that things are normalizing somewhat in the industry, but it’s not easy. We’re still really focused on the nationwide labor challenges, the inflation and increased expenses.”
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Corewell Health’s care delivery system generated $20 million in net operating income on $1.99 billion in patient revenue. Cox noted in his quarterly financial report posted online that patient volumes increased over the prior year, although the care delivery part of the health system “continues to experience increased salaries and wages expense, driven by spend in agency and critical staffing.”
The high costs Corewell paid for nurses from temporary staffing agencies during the pandemic have come “way down” to pre-pandemic levels and “we have a whole lot less of them now,” Cox told Crain’s Grand Rapids Business.
The health plan Priority Heath, with 1.3 million members statewide, generated $75.7 million in operating income on $1.61 billion in premium revenue for the first quarter. Cox noted that operating margins for Priority Health tend to trend a little higher in the first quarter, especially as most members’ deductibles renew with the start of the new year.
Corewell Health’s remaining $4.5 million in operating income came from accounting for unrealized expenses.
Going into 2023 and given the financial pressures from higher labor costs, labor shortages and inflation, Corewell Health slightly tempered financial expectations for 2023 with a budgeted 2.8% operating margin, Cox said.
Including $265.4 million in other income, including investments, pushed Corewell Health’s net income to $358.7 million for the first quarter of 2023.
The Corewell Health quarterly results follow a slight improvement for operations at health systems nationally.
Health systems and hospitals in March collectively recorded a break-even operating margin, an improvement from negative 1.5% in February and negative 1.2% in January, and the negative margins that persisted through 2022, according to monthly report by health care management consulting firm Kaufman, Hall and Associates LLC.
Despite the slight improvement, operating margins nationwide remain “razor-thin, near-zero levels, putting hospitals in a vulnerable position should a recession or a new public health emergency materialize,” according to the Kaufman Hall report that uses on data from more than 900 hospitals.
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