LEBANON — Driven largely by staffing expenses, costs are outstripping revenues at Dartmouth Health, New Hampshire’s largest private employer, according to filings with bondholders last week.

The Lebanon-based Dartmouth Health saw a $22.1 million loss, less than 1%, on a $2.9 billion operating budget in the fiscal year that ended June 30. It would have been a larger loss if not for $98.8 million DH received in federal stimulus funds.

That trend has only worsened in the first quarter of this year, which ended Sept. 30 with a $41.4 million loss, or nearly 6%, on a nearly $770 million operating budget. That loss includes $1.8 million in federal stimulus funds. The health system doesn’t expect any more, Audra Burns, a DH spokeswoman, said in a Monday email.

“While the pandemic feels ‘over’ for many people on an individual basis, healthcare organizations, including D-HH, continue to grapple with several impactful issues that were born out of the pandemic,” Dan Jantzen, DH’s CFO, wrote in a Nov. 23 filing with bondholders of the Dartmouth-Hitchcock Health obligated group, which includes Dartmouth Hitchcock Medical Center in Lebanon; Dartmouth Hitchcock clinics; Alice Peck Day Memorial Hospital in Lebanon; Mt. Ascutney Hospital and Health Center in Windsor; New London Hospital; Cheshire Medical Center in Keene, N.H.; and Visiting Nurse and Hospice for Vermont and New Hampshire.

Staffing issues are at the top of the list of challenges. There is a national shortage of nurses, which has forced up wages both for permanent employees and for traveling nurses, Jantzen wrote.

“Taken together, the increased staffing costs for permanent internal nurses and traveling nurses continue to have a major impact on D-HH’s financial performance,” Jantzen wrote. “A tight labor market has also heightened the pressure on wages across the organization.”

DH is not alone in facing fiscal challenges. The University of Vermont Health Network ended its fiscal year on Sept. 30 with a $90 million, or 3.3%, loss, according to VTDigger. That loss also was primarily due to staffing costs, VTDigger reported last week.

Though below the rates hospitals were paying during last winter’s COVID-19 surge, wages for travelers remain “significantly above pre-COVID rates,” DH told employees in a Tuesday message Burns shared in part with the Valley News.

While the COVID-19 pandemic now results in fewer deaths and less severe illness, it still is affecting staffing when workers get sick.

“When patient-facing staff are out of work due to COVID-19, we have to ask other employees to work extra hours and also rely more heavily on travelers,” according to the Tuesday message to employees. “This puts increased pressure on our overall capacity and available resources.”

Because other health care facilities are similarly short staffed, it is difficult for DH member hospitals to discharge patients to nursing homes and other step-down facilities.

“The ability to move patients ready for discharge from D-HH hospitals to the appropriate post-acute care facility in an efficient and timely manner has not returned to pre-pandemic norms, and this disruption is also a material contributing factor to D-HH’s current financial results,” Jantzen wrote.

Burns, the DH spokeswoman, said that to address the financial shortfalls DH is focused on “improving our ability to discharge patients from our hospitals to an appropriate post-acute care facility.”

She did not specify how DH plans to do that while nursing homes and other facilities are facing similar staffing challenges.

In addition, COVID-19 and inflation are affecting supply chains, causing product shortages, and driving up the costs of medications and other medical supplies.

“While we have faced and overcome financial challenges in the past and have confidence in our ability to do so again, we must acknowledge the unprecedented, national scale and macroeconomic nature of this situation, and the unrelenting pace of new problems we face,” Jantzen wrote, noting that after the conclusion of the first quarter of this year the hospital began to see an influx of patients with respiratory syncytial virus, or RSV.

Treatment of the worst cases of RSV, typically in children ages 5 and under, require that patients receive oxygen, intravenous fluids for dehydration and monitoring in case the patient’s condition changes, according to a news release on the subject DH sent out last week. The Children’s Hospital at Dartmouth Hitchcock Medical Center is the only children’s hospital in the state.

In the two fiscal years prior to the pandemic, DH reported positive operating margins. In the fiscal year ending June 30, 2019, DH reported a margin of $69.7 million, about 3%, on a budget of $2.2 billion, according to its annual financial filing with bondholders. In the year ending June 30, 2018, DH reported a margin of $47.5 million, about 2%, on a budget of $2 billion.

Those results marked improvement from fiscal year 2017, when DH saw an operating loss of $7 million, less than half a percent, on a budget of $2 billion; and from 2016, when DH posted a loss of $39 million, or about 2%, on a budget of $1.8 billion.

The health system implemented a financial performance improvement plan to recover from those losses and Dr. Joanne Conroy, DH’s CEO, took over from Dr. James Weinstein in the summer of 2017.

But when the pandemic hit in 2020, DH finished the fiscal year that June with a loss of $84.1 million, or about 3%, on a budget of $2.4 billion. That loss cam despite $88.7 million DH received through the federal CARES Act.

In fiscal year 2021, as the pandemic persisted, DH finished with a positive margin of $53.5 million, about 2%, on a total budget of $2.6 billion. That margin included $62.9 million in federal stimulus payments.

Now, with no further pandemic aid in sight, DH is “curtailing capital spending as much as possible to improve liquidity,” Jantzen wrote. “We are committed to achieving sustainable financial results, but cannot predict how the pandemic and its ongoing impact will affect operations or financial conditions in the future.”

Meanwhile, he noted that DH and its members “continue to explore all options to improve our financial performance.”

Nora Doyle-Burr can be reached at ndoyleburr@vnews.com or 603-727-3213.

CORRECTION: Dan Jantzen is Dartmouth Health's CFO. A previous version of this story included an incorrect title for him.

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