Fairview Health Services suffered a net loss of $114 million last year, largely because of investment losses and higher interest rates on debt, according to unaudited numbers released Friday.

Even without investment losses, the metro area's second-biggest chain of hospitals and clinics had a tough year because of fewer inpatient visits and more unpaid medical bills. Net operating income was $20.8 million, down 57 percent from 2007. That translated to an operating margin of just 0.8 percent, compared with 2.1 percent in 2007.

"The operating margin is strained and will be further strained," said chief executive Mark Eustis.

It's unusual for hospitals to release unaudited numbers. Fairview said it wanted to get the news out early at a time when it is imposing a pay freeze on all 22,000 employees and the Legislature is considering big cuts to the state's health care budget.

Fairview, which owns the University of Minnesota Medical Center, saw total revenues rise nearly 10 percent to $2.6 billion in 2008, boosted by acquisitions including Columbia Park Medical Group, a clinic chain.

However, operating expenses rose faster, by 11.4 percent. And while outpatient visits rose 3.7 percent, that was not enough to offset the 1.1 percent fall in inpatient visits.

Because of new technology, some procedures that once were done in hospitals with overnight stays now are done on an outpatient basis. The weak economy also played a part, with many patients putting off elective procedures.

But it was Fairview's investment and debt portfolio that took the biggest hit, falling by $134.9 million.

This week, Fairview said it was freezing 2009 pay for all employees after earlier lay-offs, reductions in pension contributions and limits on banked vacation weren't enough. Park Nicollet Health Services has done the same while Allina Hospitals and Clinics froze pay for top executives.

The wage freeze is expected to save Fairview about $25 million. In addition, Fairview has delayed big capital expenditures, including a new outpatient center, and cut spending on travel and office supplies.

Chen May Yee • 612-673-7434