Advocate Health notched a 0.6% operating margin for the first six months of the year, with operating income of $85.7 million and investment income of $938 million, the health system reported on Monday.
The health system, formed a year and a half ago through the merger of Illinois-based Advocate Aurora Health and North Carolina-based Atrium Health, is the fifth largest nonprofit system in the country by revenue. Advocate serves more than six million patients at more than a thousand sites of care, including 67 hospitals.
The new system began to report its first earnings results this year. In the first quarter, the system had an operating margin of 0.1% and revenue that barely surpassed expenses. This quarter, the operator logged revenue of $15.2 billion in the first half of the year, outpacing $15.1 billion in expenses.
Advocate reported $997.9 million of excess revenue over expenses during the first half of the year.
Advocate’s increases in revenue, like peer nonprofit operators, was driven this quarter by an increase in patient visits — particularly outpatient visits — at each of the health system’s divisions.
Over the past six months, Advocate Aurora Health experienced a 6.5% increase in outpatient visits and a 7.3% increase in physician visits in its divisions.
Patient visits increased by 7.1% and surgical procedures increased by 9.7% at Atrium Health’s Charlotte-Mecklenburg Hospital Authority. Inpatient admissions also increased by 10.2% at Atrium Health Wake Forest Baptist.
The health system also benefited from $938 million of net investment income over the first six months of the year.
Labor costs continue to impact the health system, which employs 150,000 people across six states. In the past six months, the system spent $8.8 billion on salaries, wages and benefits. The next largest expenditure was supplies and drugs, which totaled $3.1 billion.
In the first quarter, spending on salaries, wages and benefits represented over half of its expenses at $4.4 billion.
Nonprofit health systems in the second quarter have reported higher patient volumes and increased expenses as they attempt to rebound from their worst operational year in 2022 after being squeezed by economic pressures and investment losses. The losses prompted credit ratings agency Fitch Ratings to downgrade the sector to “deteriorating” last year.
Earlier this summer, Mayo Clinic and Kaiser Permanente reported operating margins that were in the black on rebounding demand for patient services. However, both systems noted rising operating expenses.
Other systems are still reporting losses. Earlier this week, Providence Health & Services reported an operating loss of $202 million despite concentrated efforts to cut costs, including a system-wide restructuring and a reduction in workforce last year that impacted executive roles.
At Advocate, the system is also shaking up top leadership. On Monday, the health system announced CFO and Executive Vice President Anthony DeFurio had resigned from his roles. Bradley Clark, senior vice president and treasurer for Advocate Health, is serving as the interim chief financial officer.