Thu. Jul 18th, 2024

Tufts Medicine continues to lose money

By Vaseline May30,2024

Tufts Medicine continues to lose money as it struggles to control rising labor costs.

The Burlington-based organization reported an operating loss of nearly $96 million in the second quarter, compared with a loss of $73.8 million in the same period a year ago.

Tufts Medicine is the sixth-largest health care system in the state by inpatient and outpatient numbers, according to fiscal year 2020 figures. The 1,099-bed system employs 13,000 people and cares for 44,000 hospital patients annually. In addition to the flagship Tufts Medical Center, the organization also includes Lowell General Hospital and MelroseWakefield Healthcare.

“As we continue our path to financial recovery, the system is making improvements to core operations year after year to ensure financial stability,” Chief Financial Officer Andrew DeVoe said in a statement.

To offset rising costs, Tufts Medicine has cut back on administrative staff. Last week, the organization confirmed to the Globe that it would lay off 174 employees, on top of the hundreds of jobs it cut last year. The wave of job losses follows a weak financial situation for the health care system, which faced potential catastrophe last year as it rushed to increase cash flow enough to satisfy bondholders.

The group managed to grow revenue modestly in the second quarter to $625 million, a gain of nearly 3 percent from the same period in 2023. But Tufts Medicine has failed to keep pace with costs. Total costs rose nearly 6 percent to $720.9 million in the second quarter compared to the same period a year ago.

The main culprit was employee salaries and wages, which totaled $324 million in the second quarter. That figure represents an increase of 4.8 percent compared to the second quarter of 2023.

Hospitals across the state are facing a shortage of health care workers, forcing them to hire expensive temporary help.

In a recent report, the Massachusetts Health and Hospital Association estimated there are nearly 20,000 job openings in the state. As a result, hospitals’ temporary labor costs more than quadrupled to $1.5 billion between 2019 and 2022.

Rising costs have eroded hospitals’ operating profit margins, a key indicator of their financial health. In December 2023, 37 percent of hospitals reported they were actually losing money on daily operations.

For the 12 months ended September last year, Beth Israel Lahey Health reported an operating loss of $132.4 million. Mass. Gen. Brigham, meanwhile, reported an operating profit of $95 million, but the windfall came entirely from one-time revenues such as COVID relief funding, which it cannot sustain indefinitely.

And then there’s Steward Health Care, which filed for Chapter 11 bankruptcy earlier this month. The Dallas-based company, which operates eight hospitals in Massachusetts, had $9 billion in debt, including $290 million in unpaid employee wages and benefits.

Tufts Medicine faces not only rising labor costs, but also lower reimbursement because 67 percent of patients have lower-paying government insurance, such as Medicaid. The system has also struggled to obtain reimbursement rates from commercial insurers as high as some of its larger peers.

For the fiscal year that ended last September, Tufts Medicine reported an operating loss of nearly $171 million, marking a significant improvement from 2022, when it lost nearly $400 million.

But that apparently didn’t impress Fitch Ratings. In February, the agency downgraded Tuft Medicine’s credit rating to negative, citing a “slower-than-expected improvement in the system’s operating performance.”

Thomas Lee can be reached at [email protected].

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