UMass Memorial narrows losses, sells pharmacy management unit for $263M
Photo | Grant Welker
UMass Memorial Health Care's University Campus in Worcester
UMass Memorial Health Care narrowed its annual loss to $10 million in fiscal 2019, selling a stake in a pharmacy management firm to help bring in needed revenue, the Worcester-based system said Friday.
UMass sold the pharmacy management services joint ventures for $263 million in August, helping the network with what leaders said is needed equipment and facility upgrades.
“There are a lot of upgrades that we think are vital,” said Sergio Melgar, UMass’ CFO.
But the revenue will also be needed to offset the second straight year of operating losses, UMass’ leaders said. If not for the sale of the pharmacy services unit Shields Health Solutions — which brought in $208 million after deferred gains and expenses — the UMass system would have had a $150-million reduction in net assets for the year, President and CEO Eric Dickson said.
“But eventually you can run out of things to sell,” Dickson said, giving a sobering assessment of the system’s need to become profitable again quickly.
The UMass system — which includes hospitals in Worcester, Clinton, Leominster and Marlborough — did see an increase in patient services revenue, up 1.6% to $2.4 billion. The hospital network increased 1.5 million patients across all its locations.
UMass Memorial lost $28 million in fiscal 2018, the first time in five years it was in the red.
“Although we were not able to achieve profitability,” he said, “we were happy with the progress that was made.”
But Dickson called the year very challenging, with state financial support for Medicaid and other services not keeping pace with far greater increases in patient expenses.
UMass Memorial was also hurt by a $157-million increase in pension obligations, a spike of 71%. Investments fell, from a $22-million gain in fiscal 2018 to a $3.7-million loss in fiscal 2019.
Revenue from the pharmacy services unit sale is expected to go toward roughly $100 million in equipment upgrades throughout the system. UMass expects to create a new spine institute at the Memorial Campus in Worcester, combining services now at two areas.
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