(Updated, 9 p.m.)
PROVIDENCE â With a decline in net income of 59 percent for its fiscal 2013, Lifespan gave tangible evidence that its financial prospects are becoming more challenging.
In financial statements released Thursday, the stateâs largest private employer â parent to Rhode Island Hospital, The Miriam Hospital, Newport Hospital, Emma Pendleton Bradley Hospital, Gateway Healthcare and a number of other entities â posted total revenue of $1.82 billion, an increase of 4.7 percent on the fiscal 2012 year, ended Sept. 30.
However, thanks in part to a 23 percent increase in its provision for bad debt to $110.98 million, as well as a 6.9 percent increase in compensation and benefits expense to $1.07 billion, the health care system saw its net income for the year drop 59 percent to $16.99 million.
The fiscal 2013 results make clear what Lifespan is facing in the near future, and why its board of directors approved a fiscal 2014 budget in September that projected a negative bottom line, the first time in more than a decade that that was the case.
One immediate result of the poor showing for the year was a requirement that Lifespan establish a debt-service reserve fund in the amount of $14.9 million to satisfy the terms of its bond-insurance policy with Assured Guaranty Ltd.
The policy covers $192 million that Lifespan borrowed from the New York-based lender in 2006 and contains a provision stipulating that Lifespanâs net income be at least twice the amount of its maximum annual debt service.
For fiscal 2012, Lifespanâs net income stood at 3.68 times its debt service, but that figure dropped to 1.69 times the debt service in the just-concluded year when net income fell to $16.99 million.
During the same period, Lifespanâs days cash on hand â or the number of days of operating expenses that Lifespan could pay with its current cash available â fell from 154 days to 141 days.
Since Lifespanâs net income has fallen below the predetermined minimum, the hospital network must now commit to establishing a debt-service reserve fund to ensure the money owed bondholders will be there if needed.