Investment portfolio gains boost Cone's financial health (2024)

Continuing strong performances by Cone Health’s investment portfolio lifted the Greensboro healthcare system to $138.3 million in excess revenue over expenses through the first half of fiscal 2023-24.

Excess revenue over expenses in a not-for-profit organization, such as Cone, equates to profit in a for-profit business. Cone’s fiscal year ends on Sept. 30.

Through the same period in fiscal 2022-23, Cone reported $73.5 million in excess revenue over expense.

Cone reported $99.8 million in investment income, compared with $84.1 million a year ago.

Not-for-profit health care systems, such as Atrium Health, Atrium Health Wake Forest Baptist, Cone and Novant Health Inc., depend on investment income to increase their bottom lines.

Cone also reported having $4.8 million in “other income” and $3.2 million in income from an unidentified joint venture.

When excluding the investment income component, Cone reported $30.2 million in income from operations, compared with $1.5 million a year ago.

Operating revenue rose 11% to $1.48 billion. That broke down to: 9.7% increase in net patient service revenue to just under $1.3 billion; a 19% jump in what it calls “premium” revenue to just under $110 million; and a 24.2% increase in other operating revenue to $70.1 million.

Meanwhile, Cone’s overall expenses were up 8.8% to $1.45 billion. Salaries and wages increased by 1.6% to $504.9 million.

Fringe benefits climbed 1.8% to $158.9 million, while it spent $44.5 million on “purchased (contract) personnel,” — mostly additional travel nurses — compared with $35.7 million a year ago.

Cone reported a “remedy payment” from the federal Centers for Disease Control and Prevention for 340B underpayments of $29.1 million, as well as Federal Emergency Management Administration-obligated reimbursem*nts of $20.8 million.

The 340B program was created by Congress in 1992 to financially assist hospitals serving vulnerable communities and Medicare patients in managing rising prescription drug costs by requiring discounts from drug manufacturers.

Among 340B participants are Triad hospitals affiliated with nonprofit healthcare systems Atrium Health, Cone Health and Novant Health, as well as 41 hospitals statewide.

In recent years, 340B has become the second-largest federal prescription drug program, offering hospitals an average 34.7% discount from drug manufacturers.

Most county health departments participate, including Forsyth. Also eligible to participate are children’s hospitals, critical access hospitals, disproportionate share hospitals, freestanding cancer hospitals, rural referral centers and community hospitals.

However, current federal law does not require hospitals to pass along 340B discount savings to patients or invest those savings into vulnerable communities.

Cone said in the first-half report that it “continued to experience industrywide financial challenges in the second quarter, particularly related to labor markets dynamics, supply and pharmaceutical costs, overall expense inflation, and payer denials.”

Cone said the first-half revenue totals do not include accruals for Medicaid-related HASP — Hospital Access and Stabilization Program — revenues expected later in 2024.

The N.C. Department of Health and Human Services said in November that Triad and Northwest N.C. hospitals will receive a combined $566.8 million in federal funding that serves as a pivotal carrot for gaining Medicaid expansion approval from the Republican-controlled state legislature.

HASP funding is led by $219.8 million to Atrium Health Wake Forest Baptist Medical Center, $126.3 million to Moses Cone Hospital and $67.2 million to Forsyth Medical Center.

HASP payments are calculated based on in-network Medicaid managed care payments to acute care hospitals, critical access hospitals, hospitals owned or controlled by the UNC Health Care System and ECU Health Medical Center. Baptist received a significantly bigger HASP payment because it serves a larger Medicaid population base than Moses Cone and Forsyth.

Cone reported a 5.9% increase to 195,068 in systemwide emergency department visits, as well as a 7% rise in outpatient visits to 639,519, a 13.8% decrease in telehealth visits to 17,404, and 1.2% increase in surgical procedures to 21,192.

The report was posted on the Municipal Securities Rulemaking Board’s website, www.emma.msrb.org. Healthcare systems’ quarterly financial reports are aimed primarily at bondholders and ratings agencies.

They are timed for release seven to eight weeks after the end of a reporting quarter.