A new analysis of Pennsylvania hospitals’ financial health reveals troubling signs for the region’s small, rural hospitals.
While Pittsburgh-area hospitals reported modest-but-generally positive operating margins, the picture is more grim just a few hours’ drive out of Downtown, according to a report Wednesday from the independent Pennsylvania Health Care Cost Containment Council (PHC4) state agency.
Ellwood City Hospital in Lawrence County, which is now actively looking for an affiliation partner, hasn’t had an operating margin in the black since 1998 and recorded a negative 7.62 percent margin for fiscal 2015.
Grove City Hospital in Mercer County had an operating margin of negative 1.52 percent, and Jameson Memorial Hospital in Lawrence County, which recently joined the UPMC health system, was at negative 2.51 percent.
Others with negative margins included Sharon Regional in Mercer County (negative 6.14 percent), Titusville Area Hospital in Crawford County (negative 11.96 percent) and Warren General in Warren County (negative 9.63 percent).
“And these tend to be the only hospitals for miles and miles around,” said Denis Lukes, chief financial officer for the Healthcare Council of Western Pennsylvania in Warrendale. “I think there’s a real need for some protection from across the state, just in terms of access to care.”
The full report can be viewed online at www.phc4.org.
Statewide, the analysis found 29 percent of Pennsylvania hospitals operated in the red, as the number of patient stays continued to decline for the eighth consecutive year. Also, Mr. Lukes said, the western part of the state gets hit harder because Medicare, in addition to its overall cuts, reimburses hospitals at a lower rate based on a formula that factors in hospital employee salaries.
Within Pittsburgh, two of the hardest hit hospitals were the Allegheny Health Network’s Jefferson Hospital in Jefferson Hills (negative 4.35 percent operating margin) and Allegheny Valley Hospital in Natrona Heights (negative 2.61 percent margin).
Other AHN hospitals, Canonsburg and West Penn Hospital in Bloomfield, meanwhile, have bounced back into positive territory in the past three years.
AHN spokesman Dan Laurent, noting the PHC4 numbers were based on calendar year 2014 data, said Jefferson’s performance “was impacted by a number of factors, including significant restructuring costs” in 2013-2014, adding that “the hospital has experienced a substantial improvement in its financial performance since then.”
UPMC hospitals all recorded positive operating margins, including outlying facilities at UPMC Hamot in Erie (9.64 percent operating margin), UPMC Altoona (7.13 percent) and UPMC Bedford (3.95 percent).
Closer to its Pittsburgh headquarters, UPMC hospital operating margins ranged from 0.16 percent at UPMC Mercy, Uptown, to 7.13 percent at Magee-Womens UPMC in Oakland.
While thinner margins can hamper a hospital’s ability to reinvest in technology and electronic health records, as well as replacing medical equipment, that’s not an issue for Mercy or other UPMC hospitals, said spokeswoman Susan Manko.
“As a system, we invest in our hospitals wherever there is a need.”
UPMC has invested $135 million at Mercy since acquiring it in 2008, she said. “We will continue to invest in Mercy because there is a need and a demand.”
The largest operating loss for fiscal year 2015 ending June 30 was negative 77.24 percent at Southwest Regional Medical Center in Waynesburg, Greene County.
On July 1, the for-profit Essent Healthcare hospital chain in Nashville sold Southwest Regional to the Washington Health System, which has renamed the hospital Washington Health System Greene.
Steve Twedt: stwedt@post-gazette.com or 412-263-1963.
First Published: May 26, 2016, 4:00 a.m.
