Partners’ investment gains make drop in operating income bearable
Partners HealthCare yesterday posted operating income of $33.3 million for the first quarter of its 2010 fiscal year, a decline of $25 million from the $58.7 million it reported for the same period last year.
But the drop was more than offset by $83.8 million the state’s largest health care system earned in nonoperating income, mostly from investment gains in the three months ending Dec. 31. During the same period the previous year, when financial markets tanked, Partners had a nonoperating loss of $244.1 million.
Overall, the parent organization of Massachusetts General Hospital, Brigham and Women’s Hospital, and other health care providers reported a first-quarter gain of $117.1 million, compared with a loss of $185.4 million in the corresponding period the year before.
By holding down costs, Boston- based Partners was able to eke out an operating margin of 1.7 percent for the quarter, said Peter K. Markell, vice president of finance. But the “tough environment,’’ including rising employee pension and health costs, will weigh on the company for the rest of the year, he said.
“As long as the economy is stressed, I think we’re going to continue to see severe pressure to manage costs,’’ Markell said. “We’re just going to have to keep the focus on that. It’s not going away.’’
In particular, Markell cited a $202 million shortfall from Medicare, Medicaid, and other government reimbursements that failed to pay the full cost of providing patient care in the first quarter, a 26 percent increase over the quarterly shortfall a year earlier. Government payers represent about 40 percent of Partners’ revenues, a lower share than at many other urban hospitals across Massachusetts. Still, said Markell, “when you run on a thin margin, these things matter.’’
Partners said its patient service revenue increased 4 percent to $1.5 billion in the October-to-December period, a gain of $60 million, reflecting increases in the complexity and severity of inpatient care and other factors. But its operating expenses, including labor costs, wages, and health benefits, grew by 7 percent, or $132 million to $1.9 billion.
Academic and research revenue increased 10 percent, or $31 million, to $331 million, with federal stimulus funding representing roughly half of the increase, according to the Partners financial report.
Robert Weisman can be reached at weisman@globe.com. 
