Investment income portfolio continues to drag Wake Forest’s fiscal 2022 financial results

Deteriorating investment income performance, along with higher personnel costs, contributed to Wake Forest Baptist Medical Center reporting a loss of $354.86 million through the three quarters of fiscal 2022 on Wednesday.

By comparison, Baptist had $339.15 million in excess revenue during the same period in fiscal 2021.

In a for-profit organization, “surplus revenue” is analogous to “profit” in a for-profit organization.

Baptist reported that its fiscal 2021 revenue increased by $150 million of “net assets that are exempt from the restrictions.” So far in 2022, there has been no release of net assets.

Baptist was hit by the sharp general decline in the stock market, reporting a total loss of $260.4 million in investment income. That compares with a loss of $190.86 million in the first half of fiscal 2022.

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It had a profit of $117.23 million in investment income through the three quarters of fiscal 2021.

For-profit health systems such as Atrium Health, Baptist, Cone Health and Novant Health Inc. depend on investment income to boost their bottom line.

These systems have also reported significant investment income losses so far in fiscal 2022.

The financial report combines reports for NC Baptist Hospital, Wake Forest University Health Sciences and Wake Forest Baptist Medical Center and all of their affiliates.

The system became part of Charlotte-based Atrium Health on October 9, 2020.

Atrium said in February 2021 that Wake Forest Baptist and Charlotte-Mecklenburg Hospital Authority, which oversees Atrium, still have separate credit groups and will continue to post separate quarterly statements “for the time being.”

Atrium told Charlotte-Mecklenburg Hospital Management on Monday that it had a $1.1 billion loss on its investments so far in fiscal 2022, compared with a $202 million profit in the same period last year.

Atrium’s total loss — which includes operations and investments — was $1.14 billion in the three quarters of fiscal 2022, compared with a profit of $452 million a year earlier.

Atrium forecast an operating loss of $75 million in fiscal 2022 and estimated an operating loss of $66 million for fiscal 2023.

It forecasts $7.71 billion in operating income and $7.78 billion in operating expenses in fiscal 2022, and an estimated $8.1 billion in operating income and $8.17 billion in operating expenses in fiscal 2023.

For Baptist, total operating and maintenance revenue through Sept. 30 was $3.14 billion, up 3.8 percent from a year ago.

Revenue from core patient services rose 2.1% to $2.47 billion.

Revenue breakdown: $1.67 billion from NC Baptist Hospital; $1.01 billion from Wake Forest University Health Sciences; and $643.86 million from other Baptist hospitals – High Point, Lexington, Davie and Wilkes Medical Centers.

Income from gifts, grants and contracts rose 6.6% year over year to $160.45 million.

Baptist reported $406.55 million in “other sources” revenue, compared with $366.93 million a year ago. This revenue stream typically comes from federal incentive payments for implementing electronic health records.

Meanwhile, operating expenses were $3.24 billion, up 9.1% from a year ago.

Wages and wages jumped 12.8 percent to $1.61 billion, partly a reflection of Baptist raising in April 2021 the minimum wage for more than 1,500 employees systemwide from $12.50 to $15 an hour.

Employee earnings rose 0.2% to $312.23 million.

Clinical and laboratory expenses rose 6.3% to $767.66 million, with much of the increase coming from higher costs related to specialized treatment for COVID-19.

Quarterly spending breakdown: $1.73 billion from NC Baptist Hospital; $1.07 billion from Wake Forest University Health Sciences; and $625.76 million from other Baptist hospitals.

The system reports: 1.8% increase in outpatient visits to 1.43 million; a 5.3% year-over-year increase in outpatient surgery cases to 32,013; a 3.3% jump in emergency room visits to 152,219; and a 3% decrease in hospitalized patients to 43,861.

Baptist posts the quarterly report on the Securities Rulemaking Board’s website, www.emma.msrb.org.

EMMA reports are primarily aimed at bondholders and rating agencies and are usually filed about 10 to 11 weeks after the end of the quarter.

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