Top RI hospital group Lifespan books $21M profit, bolstered by CARES Act

Business News

PROVIDENCE, R.I. (WPRI) — Just months after warning of a dire financial outlook, Lifespan has posted a $21 million profit for its 2019-20 fiscal year, thanks in large part to an infusion of coronavirus relief from the federal and state governments.

It marks a turnaround for Rhode Island’s largest hospital group compared with a year ago, when Lifespan reported a $35 million net loss for the 2018-19 fiscal year. (Lifespan’s fiscal year runs from Oct. 1 to Sept. 30.)

“The next few months will continue to be financially and operationally challenging for Lifespan as we manage a second surge that appears to be more severe than the first — witness the recent opening of our alternate hospital site at the Convention Center,” Lifespan President and CEO Dr. Timothy Babineau said in a statement Tuesday.

But, he continued, “With the availability of new therapies and vaccines on the horizon, and an increased recent emphasis on social distancing and mask wearing, Lifespan remains very hopeful for the future.”

Lifespan owns Rhode Island Hospital along with Miriam, Newport and Bradley and is the largest employer in Rhode Island, with roughly 16,000 workers.

The results strictly from Lifespan’s day-to-day operations — which excludes investment income — also showed major improvement, swinging from a $23 million operating loss last year to a $55 million operating profit this year.

Total revenue rose to $2.5 billion in 2019-20, up 5% from $2.4 billion in 2018-19, even as patient service revenue fell 2% to $2.1 billion. Total patient discharges fell by 11% year over year due to the effects of the pandemic.

Babineau noted that the organization “took several steps to turn around its finances” before the pandemic hit, including a March corporate restructuring that included layoffs and early retirements.

“These efforts began to yield positive results but were quickly stymied by the COVID-19 crisis when we were mandated to close ambulatory sites, temporarily suspend elective surgeries, and saw a significant decrease in office and emergency room visits,” he said.

In addition to a “significant” increase in expenses to deal with coronavirus, Lifespan said it lost $126 million from the temporary ban on elective care such as surgeries that Gov. Gina Raimondo ordered during the first wave of cases.

But Lifespan more than made up for that with emergency government aid.

The not-for-profit corporation has received $165 million in federal grants so far from the CARES Act, which Congress enacted last spring, as well as $24.7 million from the Rhode Island Hospital Assistance Partnership Program, which the Raimondo administration funded using a portion of the state’s $1.25 billion CARES Act allocation. (The state has budgeted $220.5 million for two rounds of Hospital Assistance Partnership Program grants so far.)

In addition, Lifespan received $169.9 million in interest-free advance payments from the U.S. Centers for Medicare and Medicaid Services, and took advantage of a CARES Act provision that allowed the organization to delay payment of Social Security payroll taxes and pension contributions.

“Lifespan greatly appreciates the leadership and support from Governor Raimondo, [Health Department Director] Dr. [Nicole] Alexander-Scott, our federal congressional delegation and local legislative leaders in helping to ensure that Lifespan can continue to provide the vital healthcare services upon which the state relies during this prolonged pandemic,” Babineau said.

At the moment, Lifespan is once again engaged in talks to merge with Care New England, the state’s No. 2 hospital group, whose flagship is Women & Infants. The two organizations signed a letter of intent on Sept. 8 and are currently engaged in a due diligence period. A deal would need state and federal approval.

Care New England has not yet reported its own financial results for the 2019-20 fiscal year, but its CEO, Dr. James Fanale, has warned the organization is facing a more difficult financial environment than Lifespan because its specialty hospitals — Women & Infants and Butler — have been eligible for less coronavirus-related emergency aid.

Ted Nesi (tnesi@wpri.com) is WPRI 12’s politics and business editor and a Target 12 investigative reporter. He is a weekly panelist on Newsmakers and hosts Executive Suite. Follow him on Twitter and Facebook

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