Hospitals Note Second Quarter Income Gain

Partners HealthCare Inc., the non-profit company that owns several Harvard teaching hospitals, announced earlier this month that it had quintupled its second quarter operating income from the same period last year.

The company posted a $71 million operating income for the second quarter of FY 2011, representing a massive increase from its $13 million operating income in the second quarter of fiscal year 2010.

Operating income is measured by activities related to the company’s core purpose—in this case, healthcare delivery. The increase in  income resulted from greater research revenue and higher usage of medical treatments involving expensive and complex care.

Partners Vice President for Finance Peter K. Markell said in a statement that a focus on cost reduction has also lead to continued profits.

“We will continue to improve the value we provide our patients as we slow the rate of our cost increases to make care more affordable,” Markell said.

According to the Boston Globe, overall revenue increased by about $200 million from second quarter of FY 2010 to FY2011, jumping from $1.9 billion in 2010 to $2.1 billion in 2011.

Partners also saw a spike in second quarter non-operating income—the profit the company makes through investments and activities unrelated to its core purpose—from just $9 million in FY2010 to $95 million in FY2011. The Globe cited “the strong rebound of the health care company’s investments in financial markets” as the root cause of the increase.

Partners HealthCare Inc. was founded in 1994 as a joint venture by two Harvard teaching hospitals, Brigham and Women’s Hospital and Massachusetts General Hospital. As a non-profit company, Partners now owns several hospitals in Mass., and is the largest healthcare provider in the state. Originally intended as a merger between the two founding hospitals in order to lower overall operating costs, Partners has been criticized in the past for prompting an increase in the cost of healthcare in Massachusetts.

According to a 2008 article in the Boston Globe, Partners cut a controversial deal with Blue Cross Blue Shield, the largest health insurance provider in Massachusetts, in order to raise rates.

—Staff writer Benjamin M. Scuderi can be reached at bscuderi@college.harvard.edu.