HARRISBURG, PA – A recent analysis of Pennsylvania hospital revenues points to an overall increase in total net income for the state’s hospitals, but officials at a statewide hospital advocacy group suggest those numbers don’t take into account longer term financial trends.
The report, released by the Pennsylvania Health Care Cost Containment Council (PHC4), an independent state agency charged with monitoring and controlling rapidly rising state healthcare costs, says that “statewide total net income grew from $696 million in FY09 to $1.92 billion in FY10. The bulk of this increase in statewide net income was the result of an $883 million improvement in non-operating income … derived primarily from investments in stocks and bonds, the value of held securities, endowments and charitable contributions.”
But according to Carolyn Scanlan, president and CEO of the Hospital & Healthsystem Association of Pennsylvania, the real financial picture for Pennsylvania hospitals is more complicated.
She pointed to the “continued, steady increase in uncompensated care costs,” noting that over the past five years those costs have risen in Pennsylvania by 48 percent. Like the rest of the country, Pennsylvania has been struggling with a recession, and Scanlan suggested the increase in uncompensated care costs “reflects the impact of the recession” as more Pennsylvania residents find themselves without work and unable to buy insurance.
Scanlan also cited “new insurance products” with higher co-pays and higher deductibles as contributing factors.
At Susquehanna Health, a rural health system in north central Pennsylvania, CFO Charles Santangelo echoed many of Scanlan’s concerns. He pointed to an $800,000 increase in uncompensated care costs from FY 2009-2010 for Susquehanna’s three-campus regional facility, citing as reasons both the local impact of the recession and higher patient co-pays for employer-based insurance.
As for the projected cuts in Medicare payments, he noted the program currently pays 56 percent of hospital costs for Medicaid patients, but under the projected budget that figure will drop to 49 percent, a loss to Susquehanna Health of $1.5 million.
It’s in rural Pennsylvania that the financial challenges facing hospitals become most tangible. At Punxsutawney Area Hospital, a community facility in west central Pennsylvania, CFO Jack Sisk said his organization’s experience is “a little on the negative side” of what the PHC4 report describes.
He said one of the reasons why the figures were worse in FY 2010 than FY 2009 is that a hospital-wide EHR implementation is causing additional costs and disrupted workflows.
As for the projected Medicaid cuts, he said Punxsutawney has already trimmed staff and reduced certain benefits. If the proposed state budget passes, he said, “there may be service lines” provided by the hospital that “may not continue into the future.
”For example, Punxsutawney is the only provider of Ob-Gyn services within the county, and if the service were discontinued, local residents would have to travel 25-30 miles to the nearest facility.
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