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Novant Health announced today its year-end 2003 financial results. The not-for-profit healthcare system, which includes hospitals and physician practices in the Charlotte and Winston-Salem regions, earned net income of $112 million on revenues of $1.35 billion.

The healthy net income comes at a crucial time for the health system, which has committed $220 million in 2004 and $870 million over the next five years to expand key community services and acquire new medical technology. Positive net incomes will be essential in coming years to ensure that facilities are in place to meet an expected increase in patients in the years to come. A number of those projects are either in the planning stages or are underway in Charlotte and Winston-Salem.

"Like many organizations, the beginnings of a national economic turnaround meant that we did better in 2003 than we did in previous years," said Paul Wiles, president and CEO of Novant Health. "Because we are not-for-profit, our gains, our margins, everything we have, will be invested back into new buildings, technology and people, to ensure that we will be in a position to meet very specific community healthcare needs in the decades ahead."

The financial results represented the fourth straight year of growth for the health system. Novant Health earned $47 million in operating income, a 3.5 percent operating margin. Novant's investment income produced a gain of $65 million, compared to a loss of $3 million in 2002.

Novant's investment income had an extremely positive impact on the not-for-profit health system because it generated funds for reinvestment in important expansion projects and employee resources. Novant utilized approximately $25 million from its investment income to further strengthen the health system's employee pension fund.

In addition to the gains in investments and operations, the $112 million in net income for 2003 includes a loss of $8 million related to a bond refinancing in 2003.

Like hospital systems across North Carolina and the nation, Novant Health is facing its share of challenges. A total of 50 percent of its revenues come from Medicare, which does not cover the full costs of care. In addition, Novant Health provided $187 million in charity and community benefit care in 2003. This includes the provision of services to patients with no insurance coverage, bad debt incurred from providing open community access to health services, and the unpaid charges for Medicaid patients.

Novant Health is a North Carolina-based not-for-profit, formed in 1997 by the merger of community hospitals in Winston-Salem and Charlotte. Later, Thomasville Medical Center joined the health system. Novant and its 14,500 employees serve more than 3.4 million people in 32 counties reaching from southern Virginia to northern South Carolina.

Dean Swindle, chief financial officer of Novant Health, said that the system was successful chiefly because of economies of scale and access to capital, both of which have come about as the result of the merger six years ago.

A notable bright spot in Novant's year came in June when Moody's Investors Service upgraded the systems bond rating from A1 to Aa3. The bond upgrade resulted from steady improvement in operating performance and increasing patient volumes. More importantly, the bond upgrade made it possible to refinance $121 million in debt at more favorable rates and reimburse $56 million in capital equipment costs.

The money gained is being put to work helping finance important capital projects such as the new hospital in Huntersville, a new intensive care unit and emergency department in Winston-Salem, a new womens center in Charlotte and an expanded emergency room in Matthews.

"The Federal Balanced Budget Act of 1997 hit hospitals hard," Swindle explained. "Novant postponed expansion projects like many other of our nations hospitals and health systems, but some of our most important services kept expanding, such as our emergency rooms and intensive care units. Now, we are committing a lot of capital funds to these essential programs because our communities depend upon them. We cant wait any longer."

"Put simply," said Swindle, "we are going to need more hospital services in the years to come. And the only way we can make sure we will be ready is to begin the process now."

Novant Health is a not-for-profit integrated healthcare system based in North Carolina. Hospital affiliates include Forsyth Medical Center and Medical Park Hospital in Winston-Salem, Thomasville Medical Center in Thomasville; and Presbyterian Hospital, Presbyterian Orthopaedic Hospital, Presbyterian Hospital Matthews and Presbyterian Hospital Huntersville in the Charlotte area. Other facilities and programs of Novant Health include three philanthropic foundations, two nursing home and senior residential facilities, physician clinics, outpatient surgery and diagnostic centers, rehabilitation programs and community health outreach programs.

Novant Health has been nationally recognized as the Best in Industry for Working Mothers by Working Mother Magazine and one of the Top 40 Family-Friendly NC Companies by Charlotte Parent and Piedmont Parent magazines. Additionally, Novant Health has been named to the 2004 SMG Top 100 Integrated Healthcare Networks in the country.