Mass General Brigham bumped up its operating income during the quarter ended June 30 but still sits at an operating loss for the three quarters of its fiscal year due to one-time expenses stemming from this year’s layoffs.
For the most recent quarter, the academic, integrated nonprofit system reported a $74 million operating income (1.3% operating margin), as compared to the $47 million gain (0.9% operating margin) of the same period a year prior.
Total operating revenue rose by $625 million (12%) year over year to $5.85 billion but was near-matched by a $598 million increase (12%) to $5.77 billion of operating expenses.
For the former, MGB’s management highlighted in a filing an 8% year-over-year rise in patient care revenue it said reflects a 3% increase in acute care discharges “facilitated by management’s ongoing efforts to reduce the average length of stay, which declined 3% to 5.7 days, and enhance patient access to inpatient and outpatient services.”
Premium revenues from MGB’s health plan rose $108 million (19%) year over year, which was attributed to a membership shift from state Medicaid beneficiaries to commercial and Medicare Advantage members. The system’s research and nonresearch sundry revenue grew by 8% to $791 million, while other revenue rose by 34% to $696 million on the back of specialty pharmacy funds.
MGB’s expenses include an 8% year-over-year rise in wages and benefits, which management said stemmed from the increased patient volumes and inflationary wage increases. Supplies and other expenses rose 21%, largely due to pharmaceuticals. Health plan medical claims rose 19% with the plan’s medical loss ratio shifting from last year’s 93.8% to 96.4%, reflecting increased care acuity and higher pharmaceutical costs “including GLP-1s.”
Still, MGB’s bottom line for the quarter settled at $1.03 billion, thanks to about $962.7 million of net nonoperating gains that included more than $709,000 of investment return. It had reported a $277.5 million excess of revenues over expenses with $230.3 million net nonoperating income and a $202.9 million investment income the year prior.
Now three quarters of the way through its fiscal year, MGB has an operating loss of $44 million as opposed to the prior year’s $159 million. Both of those years, however, include nonrecurring activity: a $53 million expense stemming from layoffs conducted earlier this year for the current fiscal year and $118 million of prior year provider revenues recognized in fiscal 2024.
Excluding both of these, MGB logged a $9 million operating income (0.1% operating margin) during 2025 year to date, versus a $41 million gain over the first nine months of fiscal 2024. Including nonoperating gains brings MGB’s year-to-date overall income to $1.32 billion, below the prior year’s $1.66 billion.
MGB had posted a $72 million operating loss (-0.4% operating margin excluding some prior year revenue) for the 2024 fiscal year ended Sept. 30, though hundreds of millions in nonoperating gains pushed its bottom line to a $282 million gain.
The operating struggles pushed Massachusetts’ largest private employer to launch its strategic reorganization in February, which management said in this quarter’s filing is expected to yield annualized savings of more than $240 million. The cuts came in two waves and reportedly affected 1,500 employees.
“Management continues to focus on initiatives that can drive sustained performance improvement, including patient care throughput and labor management efficiencies, and monitoring emerging federal actions and developing action plans to mitigate potential financial impacts,” according to the filing.
Meanwhile, the system has also been conducting a broader multiyear restructuring of the clinical and academic teams at Massachusetts General Hospital and Brigham and Women’s Hospital. Unveiled in 2024, the effort will see the hospitals’ teams come together as singular departments.
There’s also the winding down of a long-term partnership with the Dana-Farber Cancer Institute timed for the fall of 2028. In response, MGB announced in March a $400 million, four-year facility renovation to expand cancer capabilities and launch its Mass General Brigham Cancer before the Dana-Farber partnership’s conclusion.