The Triangle’s two largest hospital networks and giant employers posted record revenue for 2016 as the health care organizations reaped the rewards of aggressive investment and expansion.
Duke University Health System, with 17,000 employees, posted nearly $3.2 billion in revenue, a 3.6 percent increase from 2015. The 30,000-employee UNC Health Care System, which owns or partners with 11 hospitals, logged $3.6 billion in revenue, up from $3.2 billion a year ago.
UNC Rex Healthcare in Raleigh took in $954 million in revenue in the 2016 fiscal year, an 11.8 percent boost from 2015, and is on track to become a $1 billion dollar annual operation this year. Rex is benefiting from growing patient volume and is also treating sicker patients as the region’s population ages and the system capitalizes on its lucrative heart and vascular practice.
The hospitals also are highly profitable as measured by their operating income.
Rex nearly doubled its operating income to $80.3 million, while UNC Hospitals in Chapel Hill grew its operating income 24.4 percent to $230.3 million.
Duke’s operating income dipped to $303.2 million in fiscal 2016 from $355 million the year before. Duke operates three hospitals: Duke University, Duke Regional and Duke Raleigh, all profitable in 2016.
WakeMed Health & Hospitals, the third regional competitor with 8,890 employees, will report its fiscal 2016 finances next week. The Raleigh-based organization, which runs Wake County’s only Level I trauma center, posted an operating loss of about $50 million last year, citing several one-time expenses.
For the 2016 fiscal year, WakeMed had budgeted an operating income of $27 million, and as of mid-year had posted $24.7 million in operating income, according to a Friday report from Fitch Ratings. The organization’s unaudited statement reports operating income of $53.7 million.
Fitch downgraded WakeMed because the system took on $100 million in additional debt in 2015, but noted that WakeMed, with hospitals in Raleigh and Cary, is in a strong position for the near future.
As a result of aggressive expansions and acquisitions of medical practices, all three hospital networks carry considerable debt and are expected to increase spending in the coming years to remain competitive. For example, Duke University Health System had $1.2 billion in outstanding debt as of March 31, according to Fitch Ratings.
Additionally, both Duke’s and UNC’s physician networks continue to bleed cash, but the doctor networks function as entry points into the comprehensive health care systems by steering patients to labs, specialists, clinics and other facilities.
All three systems are part of an ongoing national trend of moving away from a fee-for-service reimbursement model to a cost-containment strategy in which health care systems will be paid for managing the health of patient populations and bearing the financial risk for any cost overruns.