Following the release of a financial report last week by the Pennsylvania Health Care Cost Containment Council (PHC4), the Hospital & Healthsystem Association of Pennsylvania (HAP) has said that the state's hospitals will be facing an uncertain financial future.
PHC4's report covers the fiscal year that ended June 30, 2011, and it documents that the state's hospitals provided $990 million in uncompensated care - a nearly $100 million increase in just one year.
"I think the two overarching facts coming from this report were that in 2010-2011, there was an improvement in margins, which is good news," said Roger Baumgarten, director of media relations for HAP. "The not-so-good news is that there was a spike in uncompensated care – a total of nearly 1 billion. That number doesn't go down, so it'll be even higher this year."
"The hospital financial performance documented in this report is welcome news, but it is not a long-term trend," said HAP President and CEO Carolyn F. Scanlan, in a press release. "This one-year snapshot of hospital performance masks the financial uncertainty facing hospitals in the current fiscal year and going forward."
The release of the PHC4 report follows last week's report from Moody's Investors Services that expects ratings downgrades for nonprofit hospitals nationwide to outpace upgrades this year.
"While Medical Assistance payment modernization and a short-term improvement in non-operating income helped to push aggregate hospital margins just over the threshold of viability for 2010-2011, the outlook for the current year, and subsequent years, is troubling," Scanlan said in a written statement.
Preliminary financial data compiled by HAP for the first half of the current fiscal year shows a four-percentage-point drop in total margins - the largest decline over the past seven fiscal years, said Baumgarten.
"The reimbursements are just not keeping pace," he said.
In addition, HAP recently released data showing Medicaid payments falling short of costs by $5.28 billion between 2011 and 2015, he said.
"If you're short on funds, you have to make decisions on services you can and cannot provide and staff you can and cannot have on board - or even if hospitals need to close," said Baumgarten. "We face a very uncertain fiscal future."
Scanlan emphasized that the Medicaid program has always paid hospitals at less than the cost of care, but that budget and payment policy changes in Harrisburg will cause the shortfall to more than double in the coming year.
"In fiscal year 2011, Medicaid paid Pennsylvania's hospitals $542 million less than the cost of care for Medicaid patients," Scanlan said in a press release. "For fiscal years 2013 through 2015, the shortfall exceeds $1 billion annually and peaks at $1.454 billion in 2015. Whether nonprofit hospitals, for-profit businesses or even individuals, it is virtually impossible to avoid fiscal harm when costs continue to exceed revenues. While hospitals' Medicaid payments have improved modestly over the past two years, the payment shortfall remains."