UF Health Jacksonville $83M in operating losses; financial outlook downgraded by rating agency

JACKSONVILLE, Fla. — UF Health Jacksonville is the primary trauma hospital in the area, but it’s suffering from a trauma of its own.

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Fitch Ratings has downgraded its outlook for UF Health Jacksonville amid financial challenges that saw the hospital report $83 million in operating losses for fiscal year 2023.

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“Industry wide, there are a lot of challenges,” Madeline Tretout told Action News Jax Ben Becker. Tretout is the primary analyst and Director for Fitch Ratings which provides the financial outlook for any entity that borrows money - including corporations, cities, states, and hospitals.

While the rating agency revised its outlook for the next two years, it did maintain the hospital’s issue default rating at BBB-, just a shade above junk status.

“The negative outlook is driven by some serious operating pressure,” said Tretout.

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That pressure includes labor shortages, inflation, less revenue, and funding cuts.

The hospital has just 42 days of cash on hand, far below the 75-day threshold according to the note.

Fitch said UF Health Jacksonville received about $40 million in reduced support in FY 2023, primarily as pandemic relief funding went away.

The hospital totaled approximately $160 million in various supplemental funding that helped to boost its balance sheet, including $40 million from the City of Jacksonville that it receives every year. It doesn’t include another $45 million from the city this year for capital improvements.

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“They are getting a significant amount of money to be propped up and are not making money. How is that possible?” asked Becker. “About 30 percent of their revenue comes from Medicaid, basically people who are uninsured,” responded Tretout.

That means treating patients with commercial health insurance is how hospitals make most of their money.

As for Tretout, because UF Health Jacksonville has a financial safety net, the future of the hospital to care for patients should not be impacted, for now.

“It’s a very integral part of the system,” said Tretout. “They provide an essential service to the community. They can’t go away in Jacksonville.”

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The city is encouraging people who don’t have health insurance to sign up for Affordable Care Act plans through https://www.jacksonville.gov/getcoveredjax. It improves the bottom line of non-profit hospitals and lower health care costs overall.

UF Health Jacksonville statement:

“UF Health Jacksonville, like many hospitals in the not-for-profit health care industry, has faced significant challenges throughout the past several years due to multiple factors, including the COVID-19 pandemic, which many organizations continue to recover from financially. Most of these are due to unprecedented labor pressures, which have significantly increased the cost of providing care and have had an adverse effect on capacity and patient volumes, which in turn heavily impacted operating revenues. Across the country, not-for-profit organizations have seen a drop in operating margins and cash flows, which has impacted financial ratings. Fitch did reaffirm our investment grade rating, but changed our outlook to negative. However, as Fitch noted, we expect a turnaround in operating margins that will bring UF Health Jacksonville back to previous levels, and we are already seeing those results. Our first quarter of the fiscal year was strong and exceeded expectations, and we are working on system-level initiatives that will further improve our financial performance.

Our focus continues to be on meeting and eclipsing these unprecedented challenges while continuing to provide the most compassionate, outstanding care possible to those we serve throughout this community. This standard of care is something we are proud to say has made us Northeast Florida’s No. 1 health care asset.”

City of Jacksonville statement:

“UF Health is a critical healthcare provider that provides significant care to Jacksonville, including a Level 1 trauma center and care for a large population of uninsured patients. The City of Jacksonville and UF Health are closely partnered and working together to solve this known financial challenge that goes back decades.”

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