Duluth, Minn.-based Essentia Health reported a 1.2% operating margin in fiscal 2026, down from 2.2% a year earlier, as expenses outpaced revenue growth ahead of its proposed merger with Bloomington, Minn.-based HealthPartners.
Essentia reported $42.3 million in operating income for the fiscal year ended June 30, down 41% from $71.6 million in fiscal 2025, according to its Oct. 14 audited financial report.
Operating revenue increased 6.4% year over year to $3.49 billion, while operating expenses rose 7.5% to $3.45 billion. Patient service revenue grew 7.1% to $3.41 billion, driven primarily by outpatient revenue, which increased from $2.48 billion to $2.67 billion. Inpatient revenue rose from $673 million to $702 million. Salaries, wages and benefits increased 6.3% to $2.02 billion, while supply expenses climbed 11.4% to $809.5 million.
Essentia reported $281.8 million in nonoperating gains, up from $169 million in fiscal 2025, driven largely by investment gains. The system posted a $324 million in net income, compared with $241 million a year earlier.
The financial results come as Essentia prepares to combine with HealthPartners, which reported an operating loss of about 1% on $9.3 billion in revenue in 2025. HealthPartners cited rising medical and pharmacy costs, including an 11% increase in medical trend, and reported more than $4.1 billion in claims payments.
The two organizations announced Sept. 29 that their boards approved an affiliation agreement to create a 22-hospital nonprofit system with more than 135 clinics, 6,000 clinicians and approximately 45,000 employees.
The transaction is expected to take effect Jan. 1, pending regulatory approvals.
The post Essentia’s FY26 margin dips to 1.2% ahead of HealthPartners merger appeared first on Becker's Hospital Review | Healthcare News & Analysis.