Higher costs of wages, supplies shrink Community Health’s operating income

Community Health Network said Thursday that operating income fell 38% in the first nine months of the year as the cost of drugs, employee overtime and other expenses ate into the bottom line.

The Indianapolis-based hospital system posted operating income of $12.6 million for the period, compared with $20.2 million a year ago.

The drop came even as patient admissions, surgeries and emergency visits all climbed. Total unrestricted revenue was $2.48 billion for the period, up 8% from a year ago.

But for the nine-month period, the network’s operating expenses increased by $189 million, or 8.3%. Salaries and wages climbed 4.1%, overtime pay climbed 7.3%. Supplies rose by $74.6 million or 16%, with nearly half of that coming from drug costs.

More big increases in expenses include an 18% hike in service expenses, including marketing costs associated with Community Health’s conversion to online billing, higher pharmacy drug claim costs for the network’s self-insured medical plan, higher lab costs, higher contract labor and service costs, and high virtual nursing costs.

For the first nine months of this year patient volumes climbed in nearly every category, including hospital admissions (up 5%), emergency visits (up 4.4%), outpatient surgeries (up 5.9%), inpatient surgeries (up 2.2%), and physician outpatient visits (up 7.8%). The only categories that fell in patient volume were deliveries (down 0.5%) and virtual appointments (down 8.1%).

One bit of good financial news was a turnaround in the network’s investment portfolio, which helped swing the net margin from a loss of $252.1 for the first nine months of 2022 to a surplus of $71.1 million for the same period this year.

Community operates six acute-care hospitals in central Indiana, along with dozens of immediate care centers, hundreds of primary care and specialty employed physicians, ambulatory care centers, freestanding surgery centers, outpatient imaging centers and endoscopy centers.