December 9, 2016 (Washington, DC) – It was a good news day for Howard University Hospital when it announced in September that it turned a $4.3 million profit in fiscal 2016 after several years of financial struggles. Turns out, university officials said, the hospital did much better last year than originally thought: It had a $21.3 million surplus once the auditors had a chance to review the numbers. That nearly 400 percent jump in the bottom line can mostly be attributed to expenses being lower than projected, they said. They released the numbers in advance of the audit, they said, because they felt confident the preliminary numbers reflected the positive progress of the hospital’s finances.
“The results we were showing in September were very encouraging because they were based on pretty conservative accounting assumptions,” said Michael Masch, vice president and CFO. “The really significant swing is the swing between the $19 million loss last year and the gain this year, and that is a very large swing.”
The $21.3 million profit is a significant milestone for the challenged hospital, whose financial condition hit a low in fiscal 2014 with a $58 million loss. The university hired turnaround specialist Paladin Healthcare Capital, an El Segundo, California, company to take over Howard’s operations in October 2014.
It’s also crucial as Howard University officials discuss future options for the hospital. University President Dr. Wayne Frederick has said the university is looking for a way to remove the hospital from its books and is entertaining talks with other health systems, including Paladin, that may be interested in taking over Howard University Hospital.
Among other updated financial results the hospital released this week:
Expenses: The hospital’s operating expenses were $222.6 million in fiscal 2016, down more than 13 percent from $257 million in fiscal 2015. (The unaudited operating expenses were previously reported at $239 million for fiscal 2016.) As previously reported, the hospital’s expenses were lower in fiscal year 2016 in large part to job cuts. The audited financials reflect lower than previously expected retirement reserves the hospital needed to put aside due to those cuts. The hospital also had lower than projected malpractice insurance expenses.
Revenue: The hospital’s revenue was $263.8 million last year, up less than a percent from its revenue of $262.8 million in fiscal 2015. (The unaudited revenue was previously reported at $265 million for fiscal 2016.) The revised revenue is due in part to a slight decrease in patient service revenue because the audited financial statement reflects the actual bills that were collected on rather than services that might have been billed for, but ultimately denied by an insurer. At the same time, the increase in revenue over fiscal 2015 are the result of improved billing and collections following the loss of a previous vendor who had performed that work. The increased revenue also reflects an insurance payment following a water main break in spring 2016 which flooded a basement area and damaged an operating room, requiring it to be completely renovated. The insurance coverage included business disruption coverage to cover $4 million in revenue lost during that renovation which was not initially categorized as operating revenue, Masch said.