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Federal aid rescues D-HH finances in back half of 2020

Valley News Staff Writer
Published: 3/3/2021 9:16:23 PM
Modified: 3/3/2021 9:16:20 PM

LEBANON — Dartmouth-Hitchcock Health ended the first half of its fiscal year in the black, thanks in part to aid from Washington during the COVID-19 pandemic and a strong return from Wall Street, according to a filing with bondholders.

D-HH had a positive operating margin of $38.6 million for the six months ending Dec. 31, the Feb. 24 filing said.

Credit for that performance is due to gains on investments, as well as $49.1 million federal CARES Act funds and continued growth in the Lebanon-based health system’s specialty pharmacy business.

“The resulting 2.9 percent positive operating margin for the first six months of FY21 helped us maintain our return to financial stability,” D-H spokeswoman Audra Burns said in an email.

D-HH, which employs almost 13,900 people, previously reported an operating loss of $84 million on a total operating budget of $2.4 billion for the fiscal year that ended June 30.

But D-HH’s financial recovery from the effects of the COVID-19 pandemic was slowed somewhat by increased COVID-19 case counts and hospitalizations in November and December.

“During the second quarter the prevalence of COVID within the region dampened much of the advances previously made,” D-HH CFO Daniel Jantzen wrote in the filing.

On a month-to-month basis — not factoring in the stimulus money — D-HH clawed back from a nearly 54% negative margin in April 2020 to a negative margin of just over 1% in December. But the November and December negative margins were down from positive margins of less than 1% that D-HH had seen in September and October.

As COVID-19 cases and hospitalizations rose late last year, D-HH saw reductions in outpatient appointments, discharges and surgical cases as the system adjusted to “tight staffing, stringent post-acute facility placement criteria, and the fluctuating impact of COVID in the region,” Jantzen wrote.

The positive margin for the first six months of the fiscal year, which includes the stimulus money, was an improvement of $25.5 million from the same period the prior year and substantially better — $64.9 million — than the Lebanon-based health system had planned for.

In addition to Dartmouth-Hitchcock Medical Center in Lebanon and associated clinics in the southern part of the state, the health system also includes Alice Peck Day Memorial Hospital in Lebanon; Cheshire Medical Center in Keene, N.H.; Mt. Ascutney Hospital and Health Center in Windsor; New London Hospital; and the White River Junction-based Visiting Nurse Association of Vermont and New Hampshire.

The federal stimulus payments, combined with growth in its contract and specialty pharmacy business, resulted in a $111.1 million increase in revenues compared with the first six months of the prior year. D-HH also saw a nearly 3% increase in net patient service revenue, a measurement of the health care services the system provided to patients compared with the prior year. That increase was not driven by the number of patients treated by D-HH providers, but by the high degree of care patients required, Jantzen wrote.

D-HH’s financial picture was further improved by a nearly 18% return on the system’s long-term investments for the six months ended Dec. 31, which yielded investment gains of $126.2 million. D-HH ended the quarter with 216 days’ cash on hand, up from 203 days’ in June 30, 2020. Without the stimulus money, the health system would have had just 175 days’ cash on hand.

Expenses, especially in the areas of salaries, employee benefits, medications and medical supplies, also rose in the first six months of the year to a total of $1.28 billion. That was an increase of more than 7%, or $85.6 million, compared with the same period of the prior year. The uptick in salaries was driven by increases in rates of pay, as well as by premium pay associated with traveling providers. Contributions to employee retirement accounts also increased.

In the meantime, costs for medication and medical supplies were driven upward by expanding pharmacy services, as well as costs associated with caring for more acutely ill patients and growth in COVID-19 testing.

Meanwhile, the health system received a certificate of occupancy last month for its $62.4 million expansion to an ambulatory care clinic in Manchester. Also underway is construction of a new $150 million inpatient pavilion in Lebanon, which is slated for completion by November 2022.

D-HH also continues to seek federal and state approval of a proposed combination with GraniteOne Health, which includes Catholic Medical Center in Manchester.

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




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