LEBANON — After a rocky spring when the COVID-19 pandemic first hit and revenue plummeted, Dartmouth-Hitchcock Health saw its operating margin climb back into the black for the quarter ending Sept. 30 thanks to federal stimulus payments.
Daniel Jantzen, the Lebanon-based health system’s CFO, described its $13.9 million, or 2.2% margin for the first three months of its 2021 fiscal year as a “dramatic recovery” from losses that occurred earlier in the coronavirus pandemic, in a filing with bondholders late last month.
The system previously reported an operating loss of $84 million on a total operating budget of $2.4 billion for the fiscal year that ended June 30.
Without $19.1 million in federal stimulus payments, the health system would have ended the first quarter with a loss of $5.2 million, Jantzen said in the Nov. 24 filing.
The positive margin is “ahead of where we thought we would be,” D-HH CEO Joanne Conroy said in a message to employees last week. Conroy noted that it is $16.8 million ahead of the system’s budget for the quarter.
D-HH includes Dartmouth-Hitchcock Medical Center in Lebanon, as well as Alice Peck Day Memorial Hospital also in Lebanon; New London Hospital; Mt. Ascutney Hospital and Health Center in Windsor; Cheshire Medical Center in Keene, N.H.; and Visiting Nurse and Hospice for Vermont and New Hampshire.
The system saw a $45 million, or 7.7% increase, in expenses for the first quarter compared to that of the prior year, for total expenses of $626.9 million.
The increase was driven by medical supplies, medications and salaries. The increased costs in supplies and medications were matched by revenues, the bond filing said.
DHMC and associated clinics in southern New Hampshire saw an increase in staff spending of $3.9 million, or 2.6%, in the first quarter due to increased earned time expenses and higher than budgeted costs for freelance nurses and other staff, known as travelers.
In her email to employees, Conroy said D-HH has “engaged” a Dallas, Texas-based startup called Prolucent Health, which launched earlier this year, to help address workforce needs across the system.
“Prolucent uses technology, artificial intelligence, and advanced analytics to modernize and improve the recruitment, utilization, and cost of healthcare labor,” according to an August news release announcing the company’s launch.
On the revenue side, net patient revenue, the money the health system received for patient care, increased by $10.1 million compared with the same quarter the prior year. Jantzen, in the filing, credited that growth to “D-HH’s strong recovery plan implemented in May of 2020.”
The filing showed month to month improvement in the system’s margins, even without federal stimulus funds. In September, D-HH had an operating margin of 0.6% compared with a negative margin of 53.6% in April after DHMC and other hospitals cut back on elective procedures and prepared for a possible surge of COVID-19 patients.
Jantzen attributed the growth to patients returning for care that had been postponed earlier in the year.
A mix of state and federal support helped to offset losses. As of Sept. 30, the system had received a total of $110.9 million in CARES Act stimulus grant funds, according to the filing.
It also had received $245.2 million in Medicare advance and accelerated payments, which are interest-free loans, to support liquidity through calendar year 2020.
Dartmouth-Hitchcock also has benefited from other federal and state programs including payroll tax deferrals totaling $22 million, which are expected to grow to $30 million by the end of the year; as well as employee retention credit; first responder support; the front-line employees hazard pay grant program and FEMA funding. The loans are expected to be paid back over the next three years, the filing said.
D-HH ended the quarter with 198 days cash on hand. Without the loans through Medicare and the payroll tax deferrals D-HH would have ended the quarter with just 157 days cash on hand, according to the filing.
D-HH also aided its cash position when it took out a $125 million loan in May. In late October, D-HH amended the terms of that loan by extending the term to Aug. 1, 2035, and modifying the interest rate to 2.56%, according to a separate filing with bondholders.
When D-HH first took out the loan, it was for three years at a rate of 2.02%.
“Having sufficient liquidity to weather the COVID-19 storm has been our first and foremost financial priority, and we continue to focus on sound fiscal management,” D-H spokeswoman Audra Burns said in a Monday email.
In the November filing, D-HH also informed bondholders that it continues to pursue federal and state approvals for a combination agreement with GraniteOne Health, the system including the Manchester-based Catholic Medical Center and two community hospitals in Wolfeboro, N.H. and Peterborough, N.H.
The filing also said the health system’s two major construction projects, a $62.5 million expansion of ambulatory clinics in Manchester and a $150 million new inpatient pavilion in Lebanon, are on track.
The Manchester expansion was 75% complete by Sept. 30 and is slated to be open in February, while the Lebanon project was 5% complete and slated to open in November of 2022.
Nora Doyle-Burr can be reached at ndoyleburr@vnews.com or 603-727-3213.
