At first glance, a new statewide analysis of Pennsylvania hospitals’ financial health seems a mixed bag. There was a slight dip in operating margins, from 6.02 percent to 5.15 percent, among the state’s 169 general acute care hospitals even as patient revenue increased 3.9 percent to $43.6 billion.
Another piece of good news in the Pennsylvania Health Care Cost Containment Council (HC4) report released Tuesday: Uncompensated care — care for which hospitals receive no payment — decreased from $844 million to $761 million in fiscal 2017, a 9.8 percent drop.
A closer look shows some notable disparities in the fortunes of hospitals in the eastern part of the state versus the west, as well as large/urban versus small/rural hospitals.
Denis Lukes, chief financial officer for the Healthcare Council of Western Pennsylvania, points out that hospitals in the western half of the state collectively have a higher percentage of uncompensated care than all but the southcentral region.
“That means we’re providing more free care,” he said in a phone interview Monday.
Western region hospitals also are reimbursed at a somewhat lower rate by Medicare, he said, based on the federal program’s formula that adjusts payments based on a wage index that accounts for more than half the reimbursement amount.
Add to that new requirements under the Affordable Care Act — such as imposing limitations on charges and collections — and “there’s no euphoria here,” Mr. Lukes said.
Within the western region’s 60 or so hospitals, the smaller centers in rural settings have been hit particularly hard, resulting in a reduction in services and sometimes new ownership.
The evidence is seen in the hospitals’ operating margins, which represent the revenue remaining from treating patients after the cost of providing that treatment.
The HC4 analysis recorded a -43.52 percent operating margin for Ellwood City Hospital in Lawrence County for the fiscal year ending June 30, 2017, ahead only of two specialty hospitals in the east: Barix Clinic, which focuses on bariatric surgery, in Bucks County (-78.95 percent) and Shriners Hospital for Children in Philadelphia (-307.24 percent).
The Florida-based Americore Health, LLC acquired Ellwood City Hospital in March 2017.
Two months later, Boston-based Steward Health Care took over Sharon Regional Medical Center in Mercer County as part of an eight-hospital acquisition from Community Health Systems. Sharon Regional had a -9.09 percent operating margin in fiscal 2017, according to the HC4 analysis.
Even the remaining independent hospitals likely have made, or are considering, service cuts, Mr. Lukes said. “That’s why you don’t see many OB [obstetrics] programs anymore.”
Of the 29 reporting hospitals in Allegheny and the seven surrounding counties, five had negative operating margins in fiscal 2017: Canonsburg (-14.65 percent); Ohio Valley General (-10.76 percent); Washington Health System Greene (-10.39 percent); Allegheny Valley (-4.82 percent); and Uniontown (-0.44 percent).
For Allegheny Valley, Canonsburg, Ohio Valley and Washington Health System Greene, 2017 marked the third consecutive year of negative margins.
Three hospitals, meanwhile, had operating margins exceeding 10 percent: Butler Memorial (13.91 percent); Latrobe Area (13.07 percent); and West Penn (18.90 percent).
The HC4 analysis can be read online at http://www.phc4.org/
Steve Twedt: stwedt@post-gazette.com or 412-263-19
First Published: May 8, 2018, 12:00 p.m.
