Henry Ford Health System in Detroit announced its 2021 financial data, which showed a strong year in terms of revenue, bringing in $6.8 billion compared $6.5 billion in 2020, and more patients choosing the system for the first time or returning for care than 2019 levels.
“Health care has never been a more important lifeline in our communities, and we have been honored to serve a greater number of patients,” says Wright Lassiter III, president and CEO of Henry Ford Health System. “The growth we’ve achieved is a powerful testament of both our communities’ trust in us and our unwavering commitment to our mission.”
Mounting economic pressures caused by increasing labor shortages, supply chain disruptions, inflation, and skyrocketing medical claims associated with COVID-19 continue to take a substantial toll, with costs rising to maintain the same standard of care.
The health system finished with a year-to-date operating loss of $168 million or -2.5 percent operating margin. In large part, this is due to approximately $135 million in delivery system expenses related to crisis and COVID-19 related costs and an additional $200 million related to medical claims including a $76 million premium deficiency reserve for 2022.
“Unfortunately, all of those factors caused significant increases in our expenses in 2021,” says Robin Damschroder, executive vice president and CFO of HFHS. “In the end, those expenses and other operational challenges outpaced the revenue we achieved. Additionally, by the end of 2021, we had only recognized $13 million of the $111 million in reimbursable costs from FEMA for which we applied. Those funds are essential to helping health systems manage the pandemic.”
Henry Ford’s insurance company, Health Alliance Plan (HAP), had to consider many factors to estimate 2022 medical claims costs such as medical cost trends, provider rate inflation, and the ongoing trajectory of the COVID-19 (pandemic or endemic) in 2022 to determine the level of premium deficiency reserve required.
“We have to assume that COVID’s impact to claims in 2022 will be similar to its 2021 impact,” says Dr. Michael Genord, president and CEO of HAP and executive vice president of HFHS. “This conservative approach dictates that we set aside a premium deficiency reserve for each of our insured entities. A premium deficiency occurs when costs for a future period are expected to exceed related premiums. Accounting rules require us to add this reserve for 2022 to HAP’s 2021 financial statement, which appears as an additional loss.”
Strong investment returns of more than $200 million contributed to a total net income of $41 million. The health system’s total liquidity remains strong with 182 days cash on hand which is down 24 days primarily due to the return of $124 million in accelerated Medicare payments.
Despite expectations that challenges will continue through 2022, Lassiter says the health system is optimistic about its outlook: “We understand and appreciate the headwinds we face. While there are many factors that continue to be outside our control, we are confident we can continue to lead our communities through this uniquely challenging time in our history.”
Last month, in an exclusive report in DBusiness Daily News, Henry Ford Health System and its partners plan to invest $4.2 billion to transform the neighborhoods around Henry Ford Hospital in Detroit. To read the article, visit here.