Mass General Brigham says it's cutting costs, advancing integrated care after a financially devastating 2022

Mass General Brigham wrapped its 2022 fiscal year with a $432 million operating loss (-2.6% operating margin) and a $2.3 billion net loss, which the East Coast nonprofit system attributed to “historic cost inflation” and labor pressures as well as a volatile investment landscape.

The numbers are a turnaround from the $3.2 billion overall gain MGB reported during the 2021 fiscal year. Operations that year brought in $442 million with the inclusion of $262 million in relief funding and risk corridor program subsidies; excluding those placed 2021 operating income at $180 million (1.1% operating margin).

With continued operating challenges likely on the horizon, the health system said it is adopting new initiatives to ensure its business remains sustainable for the long haul.

These efforts will focus on reducing expenses through administrative efficiencies “including eliminating vacant administrative positions,” MGB said in a release. The system will also build and support workforce pipelines to reduce its reliance on temporary staffing and push forward integration initiatives “including expanding home-based care and telehealth services to shift care beyond traditional hospital settings,” it said.

“We are confident that thoughtful and strategic decision-making coupled with efficient resource management will enable us to continue investing in critical medical research, education and the communities we serve, while ensuring that we can care for every patient who needs us,” Anne Klibanski, M.D., president and CEO of MGB, said in a release

MGB’s $432 million operating loss during the fiscal year ended Sept. 30, 2022, was largely comprised of a $395 million (-2.5% operating margin) loss from provider activity, which the system said reflected March’s omicron surge and other capacity issues. MGB’s insurance activity contributed the remaining $37 million loss.

Total operating revenue for the year landed at $16.7 billion. Increased inpatient acuity and average length of stay brought discharges down 2% from last year and “curtailed” patient care revenue growth to 4% ($437 million increase). Staffing shortages among post-acute settings also limited discharges and pushed average length of stay to more than six days, roughly 15% longer than pre-pandemic.

“The capacity crisis is not unique to academic medical centers, and all hospitals in the [MGB] system have been at, or above, 100% operational occupancy, on average,” the system wrote.

MGB’s operating expenses increased by $1.6 billion (10%) over last year to $17.1 billion in 2022. This included a 9% increase in wages (which includes temporary staffing and wage adjustments), a 13% increase in employee benefit costs and a 13% increase in clinical supply costs.

“Heading into 2023, we are employing strategies and tactics to address capacity challenges and ongoing inflationary pressures on labor and supplies costs, including a heightened focus on clinical integration to enhance patient care efficiencies and resource stewardship,” Niyum Gandhi, chief financial officer and treasurer at MGB, said in a release. “We have also prioritized engaging with Mass General Brigham’s leaders who are closest to the programs and services delivering care across the system to identify the most thoughtful and targeted approach to reducing costs.

“Simultaneously, we are taking the next steps in transitioning our care model to one based on value rather than volume, facilitated by the launch of a zero premium Medicare Advantage plan, moving approximately 140,000 Medicaid members into a full risk program and demonstrating our commitment to improving the affordability of patient care,” he said.

MGB said it absorbed $2.3 billion due to the difference between government reimbursement and care costs for Medicare, low-income and uninsured patients, a 15% ($307 million) increase over 2021.

Nonoperating losses for the year were $1.8 billion, “reflecting heightened unfavorable volatility in the financial markets,” MGB wrote. These made up the majority of the system’s $2.3 billion annual net loss.

“Healthcare is facing an unrelenting economic crisis that is impacting patients’ ability to access care. It is our responsibility at Mass General Brigham to continue to provide high-quality care while being good fiscal stewards on behalf of the 1.7 million patients whom we care for,” Klibanski said. “While what we are experiencing today is unprecedented, it’s important to remember that we have overcome challenges before during our long history. The stress placed on our workforce and our system over the past several years has been enormous, and the employees at Mass General Brigham continue to show strength and resiliency.”

MGB is among the nation’s largest nonprofit health systems and is the largest private employer in Massachusetts. Its recent losses are shared by several of its larger peers and come during a year when most of the nation’s hospitals are seeing sustained negative margins.

Unlike other systems, its commitment to cost reduction isn’t solely based on recent financial performances. Massachusetts regulators ordered MGB to outline a plan to identify and limit spending growth that they said contributed to higher costs for patients across the state. That proposal was submitted in May, rejected and then approved in late September.