Profits shrinking at Pennsylvania hospitals

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Pennsylvania hospitals continued to see their profits shrink during the fiscal year that ended June 30, 2012, according to a financial analysis released today by the independent Pennsylvania Health Care Cost Containment Council.

Locally, that trend continued through the last half of 2012, as 56 Western Pennsylvania hospitals reported their operating margins decreased by more than half, according to a separate survey by the Hospital Council of Western Pennsylvania.

Behind the sinking numbers are recurring issues -- growing uncompensated care provided to patients unable to pay coupled with falling payments from government insurance programs such as Medicare.

For fiscal 2012, the Pennsylvania Health Care Cost Containment Council analysis showed uncompensated care statewide had surpassed $1 billion annually -- a 121 percent increase from 10 years ago -- while operating revenues grew 84 percent.

Meanwhile, hospitals are seeing a 2 percent reduction in Medicare payments due to the federal budget sequestration, with the likely prospect of further future cuts.

The statewide report, which can be viewed online at, also includes information on operating and total margins, and on uncompensated care for individual hospitals.

In the Pittsburgh region, West Penn Hospital in Bloomfield and Canonsburg General Hospital -- both part of the West Penn Allegheny Health System -- recorded the worst operating margins at negative 17.58 and negative 7.93 percent respectively.

West Penn, whose emergency department was closed much of fiscal 2012, saw the biggest drop in patient revenue over a three-year period, from $286 million in fiscal 2009 to $155 million in fiscal 2012.

Both West Penn and Canonsburg now have the financial backing of Highmark as part of the Pittsburgh insurer's new Allegheny Health Network integrated delivery system. Since the reopening of West Penn's emergency department in February 2012, the hospital has seen a 40 percent increase in inpatient volume and a 28 percent increase in surgical volume, said spokesman Dan Laurent.

Among major hospitals, operating margins were highest at Magee-Womens Hospital of UPMC in Oakland (11.92 percent) and UPMC Passavant in McCandless (10.99 percent) in fiscal 2012.

The combined operations of UPMC Presbyterian-Shadyside reported $2.07 billion in patient revenue, highest in the region, followed by Allegheny General Hospital on North Side with $642 million.

Denis Lukes, vice president of payor relations and reimbursement at the hospital council, called the drop in operating margins "alarming, especially when coupled with the potential for more cuts in reimbursement from the state as part of efforts to balance the state budget."

In addition to increasing levels of uncompensated care, fewer admissions and reduced reimbursement, Mr. Lukes also attributed the declining hospital operating margins in the region to a 5 percent drop in surgeries as more patients are postponing elective surgeries.

Taking all these factors together, he said in a release, "Any additional cuts in reimbursement from the state would be devastating."

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Steve Twedt: or 412-263-1963.


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