McLaren's health plan, IT investments pull operating income down 25%

Grand Blanc, Mich.-based McLaren Health Care saw its operating income fall in the first nine months of fiscal year 2018, according to unaudited bondholder documents.

The 14-hospital nonprofit health system recorded operating income of $85.8 million in the nine-month period ended June 30, down 24.5 percent from $113.7 million in the same period a year before. McLaren partially attributed the decrease to a lack of EHR incentive payments, which the system received last year but not during fiscal year 2018. It also cited a $7.1 million loss on its recently acquired MDwise health plan business, and $8.7 million in training costs for its new clinical and revenue information system.

McLaren began its go-live of the enterprisewide revenue and IT system at the beginning of June. The last phase is scheduled to go live by December 2019.

The system generated $3.6 billion in operating revenue in the nine-month period, up 27.5 percent compared to the same period in 2017. McLaren's revenue was boosted by premiums from MDwise's 334,000-plus members.

After including expenses and nonoperating gains, McLaren ended the nine-month period with $179.7 million in net income, down 18 percent from $219.1 million posted in the same period last year.

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