Pennsylvania hospitals see margins tighten in 2014 as costs add up

Pennsylvania’s 170 acute care hospitals are seeing their incomes drop, even as their revenues climb, as the cost healthcare reform added up for facilities in the state.

Operating income across Pennsylvania’s 35 for-profit and 135 nonprofit hospitals decreased about 5 percent in fiscal 2014 from $1.8 billion to $1.7 billion, with operating margins also falling from 4.67 percent  to 4.3 percent. Also, 34 percent of hospitals lost money in fiscal 2014, according to new data released by the Pennsylvania Health Care Cost Containment Council, or PHC4.

Operating expenses outpaced the 3.1 percent growth in revenues, which hit more than $40 billion statewide, the PHC4 found. The average operating and total margins at Pennsylvania hospitals are still up over the last 15 years, hovering at 4.3 percent and 5.7 percent respectively, though down from their peaks in the mid and late 2000s in the range 5 to 7 percent.

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At the same time, most hospitals saw a positive three-year average total margin, and the average time a bill remained in accounts receivable decreased by 24 hours to 45 days.

"While the data shows many Pennsylvania hospitals experienced relatively healthy margins in fiscal year 2014, 34 percent lost money on operations and 28 percent lost money overall," said Joe Martin, executive director of PHC4.

Among the larger health systems, the University of Pittsburgh Medical Center’s hospitals saw an average margin of 2.7 percent, ranging from 9 percent at UPMC Harmot and 8.5 percent at the Magee Women's hospital to  negative 4.1 percent at UPMC Mercy, the system’s lone hospital in the red.

UPMC’s chief rival, Highmark Health-owned Allegheny Health Network, saw an average margin of negative 5 percent, driven by losses at the once near-bankrupt West Penn Allegheny hospital. In the second year of Highmark’s ownership, Allegheny Health Network’s operating losses declined to $37 million, after a $402 million loss in 2013 -- Highmark maintains that the system is on the path to sustainability. Across the three regions of western Pennsylvania where AHN and UPMC are the dominant health systems, the average operating margin was 1.5 percent.

In greater Philadelphia, hospitals saw an average margin of almost 5 percent, although 17 out of 44 hospitals lost money.

The four hospitals of the University of Pennsylvania Health System posted an average margin of 4.1 percent, with the flagship University Hospital earning a 15 percent, a cool $380 million. The three acute care hospitals of the newly merged Thomas Jefferson and Abington Health System, Jefferson Health, saw an average margin of 2.3 percent, with the large University Hospital earning a 1.15 percent margin, the Abington Memorial Hospital 1.25 percent and the smaller Lansdale facility 4.5 percent.

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The four hospital Main Line Health System had an average margin of 12 percent, while the two hospitals in the Einstein Healthcare Network lost money, an average of negative 1.2 percent. The Children's Hospital of Philadelphia also had a successful year, with a 12 percent margin bringing in net income was $223 million from revenues of $1.8 billion.

Statewide, 35 for-profit acute care hospitals had an average margin of 1.7 percent. Twelve of the hospitals operated by publicly traded corporations made a profit during 2014, while nine hospitals operated at a loss, including Tenet’s Hahnemann teaching hospital in Philadelphia and seven Community Health Systems facilities. LifePoint Health had an average margin of negative 0.9 percent at its four hospitals, thanks to a negative 10 percent margin at Conemaugh Valley Memorial Hospital. Among the privately-held chains, two Prime Healthcare Services-owned suburban hospitals  posted losses, along with Barix Clinics of Pennsylvania, Essent Healthcare and Sharon Pennsylvania Hospital Company.

Commercial health insurers contributed 48 percent,  or $18.2 billion, of statewide net patient revenue at  Pennsylvania hospitals in 2014, while Medicare paid for 34 percent, or $13.2 billion, and Medicaid paid for 13 percent, or $4.9 billion.

“The continued growth of uncompensated care,” now at 2.8 percent of net patient revenues, “remains a major concern for Pennsylvania hospitals,” although that phenomenon should be decreasing as Pennsylvania expands eligibility for Medicaid under a new Democratic Governor, said Martin.

Here’s the full list of how Pennsylvania’s hospitals fared in 2014. Type the name of any facility in the search box to find its margin information:

Twitter: @AnthonyBrino