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Reported losses more than double in latest Centegra Health System statements

McHenry County's largest employer loses $62.3 million in income

Sarah Nader file photo – snader@shawmedia.com
Centegra Health System CEO Mike Easley makes a statement at the Health Facilities and Services Review Board hearing June 20 for the Mercy hospital that plans to build in Crystal Lake.
Sarah Nader file photo – snader@shawmedia.com Centegra Health System CEO Mike Easley makes a statement at the Health Facilities and Services Review Board hearing June 20 for the Mercy hospital that plans to build in Crystal Lake.

CRYSTAL LAKE – The Centegra Health System more than doubled its last reported losses in its most recent unaudited financial statements released at the end of fiscal 2017.

The Crystal Lake-based hospital system has mounting debt and ended its fiscal year June 30 with $62.3 million in operating losses, according to an unaudited financial statement found on Electronic Municipal Market Access, a municipal security website.

The losses are $20 million more than officials projected in May. Centegra initially expected losses of up to $40 million, according to a filing with Fitch Ratings.

That $62.3 million loss stands in stark comparison to last fiscal year’s profit of $4.3 million, but the higher-than-anticipated loss does not mean the company failed to increase revenue.

In fact, Centegra saw revenue increase 12.7 percent to $564.2 million from fiscal 2016 to fiscal 2017. However, the health system also saw a 26.3 percent increase in expenses to $626.5 million, which likely contributed to the $62.3 million figure.

Among those expenses, salaries saw the greatest jump – more than $50 million from fiscal 2016 to fiscal 2017.

Previously, Centegra officials blamed rising expenses on the cost of opening its new Huntley facility and an increase in patients receiving uncompensated care.

Centegra spokeswoman Michelle Green previously said that although the Affordable Care Act has reduced the number of uninsured people, it did not ease the pressures that hospitals face when medical bills are not paid.

“Through the Affordable Care Act, there has been a dramatic shift to high-deductible plans through employers and through the state-run exchange,” Green said. “These plans place a heavy financial burden on patients who seek health care, and that is transferred to our health system if patients are unable to afford their care.”

Officials also have maintained that the losses were not the effect of empty beds.

Bed occupancy rates dropped from 70 percent in 2015 to 54 percent in 2017, according to the same financial statements.

To try to save money, Centegra announced an overhaul in June of its facilities and services. The plan included closing its intensive care and medical-surgical operations in Woodstock. Centegra moved those services to McHenry and Huntley hospitals.

Officials have projected that the changes will save the health system $15 million annually.

The emergency department at the Woodstock hospital now is a basic unit, which means people who need inpatient or surgical care will be transferred to a different facility.

Some services, such as Centegra’s outpatient mental health program, will move to the Woodstock campus.

The changes took effect Aug. 14, and some require state approval. If the Illinois Health Facilities and Services Review Board denies Centegra’s plans, some changes would have to be reversed. The board will consider Centegra’s proposal in November.

Residents and city officials have been critical of the changes. They said the community needs comprehensive emergency services and health care.

Centegra is McHenry County’s largest employer, and officials have yet to announce total job cuts associated with the project. Centegra CEO Michael Eesley estimated that 50 to 120 jobs were eliminated in June.

Eesley said Wednesday that times are tough for hospitals across the U.S., and the system considered every viable option before making this decision, which will benefit the most people.

“There are 30 communities in McHenry County, and it is not possible to provide inpatient care in every one of them. Our decision helps the people of Woodstock to continue to receive their day-to-day medical care and emergency services right within their community,” he said. “Those are the services that are used the most frequently. ... By providing acute inpatient care at our hospitals in McHenry and Huntley, we give the most residents the closest access to inpatient services. Many specialty services will only be available in Woodstock. ... We serve an entire community and must make our decisions based on every patient’s needs.”

The most recent financial statement release arrives amid the health system’s lengthy attempts to finalize its merge with Northwestern Medicine. The two announced they would begin discussing the affiliation in April 2016.

“We are planning to join Northwestern Medicine in 2018,” Green said in an email.

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