Bon Secours Health System saw a significant drop in its operating margin in the first quarter of fiscal year 2017, which the Baltimore-based system attributes, in part, to the presidential election.
"The first quarter of FY17 has been challenged with the uncertainties of the presidential election, which increased the capital market volatility and disruption in the healthcare industry as patients, physicians, payers and providers prepared for a new administration in Washington, D.C.," said Bon Secours in recently released bondholder documents.
The system reported operating income of $10.4 million in the three months that ended Nov. 30, compared to operating income of $19.1 million in the same period of the year prior.
Bon Secours said it was also challenged by the pending physician payment changes under the Medicare Access & CHIP Reauthorization Act in the first quarter.
"While not separately quantifiable, this did disrupt the system's physician practice patterns resulting in a more pronounced shift from inpatient to outpatient services and a shifting of services into physician-owned care delivery," the system said.
Bon Secours said strong outpatient volumes fueled a 3.1 percent year-over-year increase in revenue. The system posted revenue of $806.1 million in the first quarter of FY 2017, up from $782.1 million in the same quarter of the year prior.
The system's expenses outpaced revenue growth in the first quarter of FY 2017, increasing 4.3 percent year over year to $795.7 million. Bon Secours said the increase in expenses was largely attributable to continued expansion of physician practices. The system also reported an 11 percent year-over-year increase in pharmaceutical supply costs, which was due to the growth in oncology programs in many of the system's markets.
Bon Secours ended the first quarter of FY 2017 with an operating margin of 1.3 percent, down from an operating margin on 2.4 percent in the same period of FY 2016.
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