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Format: 04/16/2014
Format: 04/16/2014


Pittsburgh Business Times: PCH4: Investments, economy pressure hospitals

Thursday, May 20th, 2010

by Kris B. Mamula

Anemic investment returns eroded Pennsylvania’s hospital income in 2009 while the cost of charity care rose sharply from 2008, twin forces that continue to squeeze the state’s 167 general acute care hospitals, according to a survey by the Pennsylvania Health Care Cost Containment Council.

The total margin at the state’s 167 general acute care hospitals fell by 2.62 percentage points to 2.08 percent in fiscal 2009 while the amount of charity care provided to people unable to pay rose 7.9 percent to $807 million. Most of the $865 million drop in statewide net income was the result of a $764 million decline in non-operating income, revenue mostly from investments in stocks, bonds and securities.

The survey reflects new financial pressures for hospitals at a time when they face new regulatory costs, according to Carol Scanlan, president and CEO of the Hospital & Healthsystem Association of Pennsylvania, a Harrisburg-based trade group.

“Over the past two years, hospitals have taken necessary steps to reduce costs and increase efficiencies while striving to maintain services for their communities,” she said in a prepared statement. “But hospitals, much like other sectors of the economy, face mounting pressures due to looming pension obligations and the costs of implementing national health reforms.”

Forty-four percent of hospitals statewide have negative total margins, according to PHC4, and two-thirds have a three-year average total margin of 4 percent or lower, the return widely considered by economists to be the minimum margin required for a hospital to remain financially viable, Scanlan said.

Locally, one-third of the University of Pittsburgh Medical Center’s 15 hospitals reported negative operating results for fiscal 2009: South Side, -5.92 percent; Children’s, -3.93 percent; Bedford Memorial, -2.57 percent; McKeesport, -2.49 percent; and Mercy, -.74 percent. UPMC's Braddock Hospital had an operating margin of -13.17 percent, but has since closed.

In the five-hospital West Penn Allegheny Health System, only West Penn Hospital showed a negative operating margin, -4.25 percent. West Penn’s losses reflect a three-year decline in net patient revenue, a 2.50 percent loss between 2006 and 2009.

Results were not separated for Allegheny General Hospital’s Suburban Campus, which on Thursday announced the closures of its emergency department and inpatient admissions. Outpatient services will continue at the Bellevue facility, and through an independent provider, long-term acute care.



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