MD Anderson finances back in the black

For the first time since January 2016, MD Anderson Cancer Center’s operating margins are in the black on a year-to-date basis, according to the Houston research hospital’s latest financial records.

The milepost marks a big turnabout for MD Anderson, given a top official’s warning last October that if it did not gain control of its finances, the institution was on track to lose as much as $450 million in the fiscal year that ends Aug. 31. It lost $169 million from September through December, then slashed roughly 1,000 jobs in January, 778 of them by layoffs.

In all seven months since, however, MD Anderson has recorded revenues in excess of expenses. As of the end of July, a month before the end of the fiscal year, it was $11 million in the black for the year. Figures for August and the full fiscal year will be available in a month.

In a memo emailed to managers Monday, new Chief Financial Officer Ben Melson thanked “everyone for managing our expenses and holding our costs down during these last few months.”

“We’ve positioned ourselves well for a strong finish to the fiscal year,” Melson wrote. “We can begin fiscal year 2018 in a strong position if we continue the good stewardship and collaboration that has helped guide us through this financial turnaround.”

The consecutive positive margins included gains of $92.1 million in January, $20 million in February, $12.8 million in March, $590,000 in April, $19.6 million in May, $24.2 million in June and $11.5 million in July.

Before the turnabout, MD Anderson lost nearly $440 million over a 16-month period, including $267.1 million in the fiscal year that ended Aug. 31, 2016.

Melson wrote that MD Anderson’s operating margin in July was $11 million on a budget of $8 million, or 3.2 percent of operating revenue. He added that the center’s total operating expense of $345 million was $25 million, or 7 percent, below budget.

Operating margins are considered a key indicator of a hospital’s financial health, even if they do not tell the whole story. Thanks to other revenue streams, such as state funding and philanthropy, MD Anderson remained in the black throughout its rocky 16-month period.