PROVIDENCE – The new Lifespan annual report for the 2012 fiscal year, covering from Oct. 1, 2011, to Sept. 30, 2012, offers a series of snapshots roughly paralleling Dr. Timothy J. Babineau’s first year as president and CEO of the state’s largest hospital network and private employer.
The annual report captures a specific period of time and, much like mining previous claims data from a patient that is between nine months and two years old, it does not necessarily reflect nor predict dynamic market changes and challenges that exist today. But it does offer some perspective in identifying trends moving forward, as defined by the hospital system’s leadership.
Lifespan’s 2012 financial statement listed total operating revenue as $1.64 billion, with total operating expenses $1.63 billion, with an additional $17.9 million in income from operations, for a net income of $41 million. Net patient service revenue was $1.46 billion, and research funding brought in $80.9 million in revenue.
However, in March of this year, six months into fiscal 2013, Lifespan announced actions it was taking to address a shortfall of more than $100 million in operating revenues, laying off more than 100 employees.
Babineau told Providence Business News in an interview in June that Lifespan had to “right size” its operating expenses profile in response to declining reimbursements from Medicare and Medicaid under health care reform. “The current situation for health care is not going to be business as usual going forward. Our business is challenged,” he said.
Looking backward, comparisons with the previous financial statements from the 2011 fiscal year may be seen as identifying some of the trends. In 2011, total operating revenue was higher, at $1.69 billion, total expenses were higher, at $1.68 billion, income from operations was lower, at $4.9 million, and net income showed a loss of $9.2 million, reflecting a one-time cost of a lawsuit. Net patient service revenue was higher at $1.51 billion, and research funding was slightly lower, at $80.8 million.
Looking forward, important changes not reflected in the 2012 annual report include Babineau’s decision to invest more than $100 million in building a new health IT infrastructure, aimed at creating a platform of interoperability across all the hospitals and networks in Lifespan’s system as part of a larger effort to move from being “hospital-centric to patient-centric,” as Babineau described in an earlier interview with PBN.
The 2012 annual report also does not include the $45 million investment in the partnership with Providence Community Health Centers as the anchor tenant in a new retail and office space on Prairie Avenue in South Providence.
It does mention the new affiliation with Gateway Healthcare, with the goal of integrating behavior health services in locations throughout Rhode Island. The deal was finalized earlier this month, and with it, the number of Lifespan employees grew to more than 13,000.
In an opening letter from Babineau and Scott B. Laurans, chair of the Lifespan board of directors, the two leaders point to what they called “a pivotal moment” in the history of medicine: the “shift in medicine from its centuries old focus on cure to a focus on prevention.” They described the essence of the current revolution in American health care as “the creation of a partnership between patients and providers who work toward a common goal of patient wellness.”
A reflection of that change is Lifespan’s shift from inpatient hospital services to outpatient facilities in the community and a focus on a continuum of care for chronic diseases, such as obesity and diabetes, according to Babineau and Laurans.
The challenge, they wrote, is to help “the Lifespan system remake itself in this era of profound change and…to design a system that works for all.”
One important context in which to view Lifepan’s 2012 annual report is the trend of consolidation of Rhode Island’s acute care community hospitals, with South County Hospital the only remaining acute care community hospital in the state that is not yet affiliated nor in the process of seeking to join a larger hospital network.
Another context is the development of analytics to better manage patient health outcomes in a system of bundled and global payments and shared shavings contracts. A third context is the integration of behavior health services within hospital systems.
And, with the advent of health care reform implementation, there is also a renewed focus by the R.I. General Assembly on health care costs as they compare to the state’s annual GDP, considering the development of a cost commission similar to what has been done in Massachusetts.