A tough flu season led to a jump in labor costs during first quarter for the region's two largest health systems.
Kaleida Health and Catholic Health each saw the costs for salaries and benefits increase by more than 5 percent during first quarter, according to financial statements filed with bondholders.
Kaleida Health, which employs more than 10,000 full- and part-time workers, paid $182.6 million in salaries and benefits during the first three months of the year, an increase of 5.4 percent over the same period last year. Catholic Health saw an increase of 6.7 percent, paying out $119.8 million in labor costs for about 8,500 workers, or about 7,025 FTE systemwide.
Jim Dunlop, CFO at Catholic Health, said the biggest reason for the jump was a major influx of admissions and emergency department care in January related to the flu outbreak.
"We had an anomaly and January was a unique month in that the flu outbreak in Western New York and around the country created a situation where the medical volume was significantly higher than what we've seen in the few years," he said. "Both hospital systems were really in almost a crisis level in the emergency department. We had a tremendous amount of primarily seniors and elderly hit hard by the flu who couldn't really be treated outside of the acute setting."
"If volumes are high, you want to be able to react to that, but also, when volume drops as a management team you have to be able to flex down or it really shows up in the bottom line very quickly," Dunlop said.
The financials reported by Catholic Health to the bonding agencies included consolidated numbers for Mercy Hospital of Buffalo, Sisters of Charity Hospital and Kenmore Mercy Hospital, along with its administrative function. Overall, the organization had operating gains of $4 million during first quarter, with $207 in expenses and revenue of $211 million. The system saw expenses and revenue grow at about the same pace, with overall operating expenses up 6.6 percent compared to first quarter last year and operating revenues up 7.4 percent.
The situation was reversed at Kaleida, which had operating losses of $4 million during first quarter with operating expenses of $316 million compared to revenue of $312 million. According to the financial statements, the system had a 4.6 percent increase in operating expenses, though revenues increased just 2.3 percent.
Kaleida Health includes Buffalo General Medical Center, Women & Children's Hospital of Buffalo, DeGraff Memorial Hospital and Millard Fillmore Suburban Hospital as well as HighPointe on Michigan, its longterm care facility, and other ancillary services.
Kaleida, which is in the final 10 days of negotiations on a new labor contract for the majority of its employees, declined to comment for this story.
Dunlop said Catholic Health's labor costs include a combination of full-time, part-time and per-diem workers, which enables the system to flex up and down according to fluctuating patient volume.
Volume, and the responding labor costs, are already beginning to stabilize in second quarter and are expected to continuing to slow down into the summer months. That's typical in the cycle, Dunlop said, when medical admissions tend to come down with fewer instances of upper respiratory infection and flu-like symptoms, and more broken bones, bumps and bruises.
"We're trying to manage in the new world, where rates aren't going up," he said. "We're going to have to get used to managing in the range of probably 2 percent or less in terms of actual (reimbursement) rates. The only thing that counteracts that is if you have volume or market shifts."