CHARLOTTE / WINSTON-SALEM, NC - Novant Health, a North Carolina based not-for-profit health system, posted $115 million in net income in 2005, almost equaling 2004's net income of $116 million.

The $115 million net income (excess of revenue over expenses) consists of two components: 1) operating income of $68 million, which increased 8% from 2004 and; 2) investment income of $47 million, which declined 11% from the previous year and tempered overall net income results.

"As a not-for-profit hospital system, we constantly reinvest our gains in new healthcare programs, building renovations and technologies, all to address the health needs of our communities," explained Paul Wiles, Novant's president and CEO.

Several of those new programs included additional resources for people struggling to pay their bills. In 2005 Novant experienced substantial increases in the number of uninsured patients its staff and facilities cared for, increasing 29% from the previous year. To assist these individuals, the health system developed two new financial assistance programs last year that are now being offered to patients. Uninsured patients who do not qualify for charity care now receive a discount from their hospital bill. The health system also added a catastrophic benefit for patients who have a balance of $5,000 or more, even if they have health insurance. With this program, a financial counselor evaluates patients' individual situations to determine if they qualify for a discount or full write-off from their remaining balance.

The two new financial assistance resources are in addition to Novant's charity care program, which excuses the entire hospital bill for patients with incomes up to 200% of the federal poverty line. The charity care program covers approximately 75% of all uninsured hospital patients treated at Novant. For example, a family of four with an annual income of $40,000 qualifies for complete charity care at Novant hospitals.

One other main use of Novant's net income is to fund capital improvement, estimated at $1.2 billion over the next five years. Projects include an inpatient and technology tower at Forsyth Medical Center, expansion of the emergency departments at both Presbyterian Hospital Matthews and Thomasville Medical Center, and major investments in information technology. The overwhelming majority of capital projects will serve an expanding community need, such as increases in emergency room visits and other patient services such as maternity and cardiac care.

Novant's employment also grew in 2005. The health system employed 15,990 staff members by the end of 2005 compared to 14,799 in 2004.

"Our staff worked hard in 2005 to help achieve this level of success," commented Wiles. "We're treating more patients and they're rating the quality of our care even higher than previous years. Long term, you can only be successful financially when your staff provide exceptional care to patients and families. And Novant employees are accomplishing that goal."

Employment rose for several reasons. The increase in the number of patients choosing Novant Health services contributed heavily. In 2005, emergency room visits increased 20%, surgeries 12%, inpatient admissions 10% and outpatient physician visits 8%. Another contributing factor was the increase in physicians joining the Novant medical groups and clinics, rising 21% last year.

Growth in services and staff should continue as a trend. In 2005, Brunswick Community Hospital chose to join Novant Health. The 60-bed hospital near North Carolina's southeastern coast, which had been leased by a national hospital group, is transitioning to Novant in 2006. Novant competed with approximately ten other health systems during the evaluation process by Brunswick County officials and community leaders.

"We're proud to have been chosen by Brunswick leaders," explained Dean Swindle, Novant's chief financial officer. "One of our best strategies for minimizing the impact of reimbursement shortfalls is to share our supply and administrative costs with more hospitals and clinics. When we purchase surgical supplies for eight hospitals instead of seven, we save money. When more hospitals pool together funds to pay for skyrocketing medical liability insurance, we save money that can be put to better use, such as purchasing new diagnostic technology like PET scanners."

Swindle emphasized that the biggest benefit for a not-for-profit health system to grow larger is to preserve the quality of care for our patients and to provide staff with the resources they need to further improve our services.

"Our expenses are rising at a faster rate than the reimbursement for our services," he continued. "So to maintain the level of finances we need to purchase new technology and to provide care to the uninsured, we'll have to continue to better leverage the advantages of being a healthcare system."

Swindle explained that the health system's operating performance and ability to grow are essential because of the unpredictability of the stock market and investment opportunities. He pointed out that Novant's investment income dropped last year, dipping to $47 million in 2005 compared to $53 million in 2004. "Our investments performed better than the overall market, which was down last year," he commented. "We've better diversified and included more long-term investments. Historically not-for-profit organizations have invested conservatively and, of course, that yielded conservative income. Now, we're investing more aggressively but still avoiding high risks. We rely heavily on our operating income, but it's not enough all by itself to properly fund renovations and new medical technology. We also need good levels of investment income."

Swindle also emphasized that important capital projects over the next five years will require high levels of both operating and investment income. For example, Novant has budgeted $30 million over five years for implementing a patient Electronic Medical Record for physician offices. He believes this conversion from paper forms and medical records to an electronic version is one of the Novant's most important upcoming projects, one that will dramatically improve communication, patient care and efficiency.

Novant Health is composed of physician medical groups and eight hospitals: Presbyterian Hospital, Presbyterian Orthopaedic Hospital, Presbyterian Hospital Matthews and Presbyterian Hospital Huntersville in Charlotte; Forsyth Medical Center and Medical Park Hospital in Winston-Salem; Thomasville Medical Center in Thomasville; and Brunswick Community Hospital in Supply, NC. The facilities and their employees serve more than 3.5 million people in 34 counties from southern Virginia to northern South Carolina, and along the southeastern coast of North Carolina.

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Novant Health Financial Results