Strip away the emotional attachment to a neighborhood institution, set aside the discussion about the obligations of a multibillion-dollar, tax-exempt entity, and the decision to close UPMC Braddock Hospital in January is simple, local health economists say.

"The thing's been flowing red ink for years. It's economically irresponsible to keep it open if it's inefficient," said Steve Foreman, associate professor of health administration and economics at Robert Morris University.

"With any business, you have to cover your costs," agreed Martin Gaynor, a health economist and professor at Carnegie Mellon University's Heinz College. "It's clear that at some point, if a community has been declining, it's not going to be able to support certain institutions, and a hospital might be one of those."

The numbers for UPMC Braddock are stark, according to cost and quality data collected by the independent Pennsylvania Health Care Cost Containment Council:

It had an operating margin of negative 5.46 percent over three years ending in June 2008. Operating revenue, which is income earned by delivering patient care, is the primary way that hospitals make money. The operating margin reflects the percent of operating revenue remaining after all operating expenses are paid.

Things were worse in fiscal year 2008, which began on July 1, 2007 and ended June 30, 2008, when the operating margin was negative 7.11 percent, exceeded in this region only by UPMC South Side (negative 7.19 percent) and Canonsburg General Hospital (negative 9.67 percent, due to a systemwide writedown by the West Penn Allegheny Health System). It is worth noting that the 2008 fiscal year does not include the brunt of the recession.

Revenue from patient care -- a reflection of how much the hospital is used -- ranged from $51 million in fiscal 2005 to $57 million in fiscal 2008, the lowest among UPMC hospitals. By contrast, patient revenue at UPMC McKeesport was $107 million and UPMC South Side, which was converted to an outpatient center earlier this year, had patient revenue of $83 million.

But the more important question, Dr. Foreman suggested, is why the hospital lost money.

The answer involves not only the obvious -- a community with a declining population base in the grips of a recession -- but also the choices of those who remain. And, Dr. Foreman noted, the health care system encourages, or at least does not greatly penalize, patients who want to go to the biggest hospital with the most cutting-edge equipment. "People vote their preference with their feet."

For UPMC Braddock, that was a lopsided vote not in the hospital's favor. Spokesman Paul Wood said their data showed that four of five Braddock residents were bypassing their neighborhood hospital to get care elsewhere. He insisted that it was low use, and not financial losses, that prompted the decision to close Braddock.

In the past week, the 123-bed facility has had fewer than 40 patients some days, he noted. If UPMC Braddock had 250 beds and only 185 to 195 occupied -- resulting in the same $7.5 million loss it has now -- "would we have still closed it? The answer is no," Mr. Wood said.

Higher use, he said, is also the reason UPMC doesn't intend to close UPMC McKeesport, which had an operating margin of negative 3.5 percent in 2007-08.

Said Dr. Gaynor: "Even for a nonprofit, the firm as a whole has to break even. If even one unit is in the red, that means that other units are going to have to be in the black enough to subsidize that."

Systemwide, UPMC ended fiscal year 2008 with net assets of $3.586 billion, according to its audited consolidated financial statement, down from $3.623 billion the year before. Operating revenue was just under $137 million, compared with $220 million the year before.

Earlier this year, UPMC converted South Side Hospital, which also had a negative operating margin, to outpatient only and transferred South Side's inpatient services to UPMC Mercy, another hospital that was losing money before UPMC took it over in January 2008.

UPMC also has plans to build a new hospital in Monroeville, a move that was met with criticism from those wanting to keep the Braddock facility open, especially since a UPMC official gave assurances in November that the system remained committed to its hospitals in Braddock and McKeesport. But Dr. Foreman said the move could make sense economically.

"There could easily be demand for one and not the other."

Subsidizing losses is particularly difficult in a down economy. A recent survey by the Hospital Council of Western Pennsylvania found that charity care -- care that is provided free of charge, or at greatly reduced rates due to a patient's inability to pay -- increased by 57.36 percent in Allegheny and surrounding counties from July 2008 through June 2009.

In real dollars, the increase went from $131.8 million to $207.4 million in those 12 months.

"I was shocked myself when I saw that," said Pat Raffaele, vice president for advocacy and communications at the hospital council.

Although the hospital council does not release responses from individual hospitals, UPMC Braddock was among the 28 local hospitals responding. The University of Pittsburgh Medical Center and its affiliated hospitals are not hospital council members.

PHC4 data also showed that the Braddock hospital had 4.36 percent uncompensated care -- charity care plus bad debt as a ratio to the total care provided by the hospital. Only Highlands Hospital in Connellsville, Fayette County, at 4.75 percent, had a higher rate of uncompensated care in this region.

Still, it is uncertain how much money will be saved by closing the Braddock hospital.

Obviously there is savings in not having to maintain, equip and staff the facility.

But some of those driving past a shuttered UPMC Braddock could face higher per-diem costs at other hospitals and, clearly, the cost of staffing, equipping and maintaining a top tertiary-care hospital exceeds the expense of running a small community hospital.

"Nobody is looking for ways to get the modality that is the most efficient," said Dr. Foreman. "Do community hospitals have to die? Could we find a better role for them where they are efficient?"

Mr. Wood disagreed that per-diem costs at UPMC Shadyside or Presbyterian would necessarily be higher than at Braddock. UPMC Braddock with low occupancy could have a higher cost-per-patient than a busy tertiary-care facility, due to overhead and other fixed costs, he noted.

But Dr. Foreman countered that "it would be highly unusual for per diems at a small community to be higher than for an inner-city teaching hospital."

For Braddock residents, of course, any logic over the closing does little to blunt the pain of lost jobs, losses to nearby or related businesses or the added cost of traveling farther for care.

"This could be an example of a tough decision where there really wasn't any good alternative," said Dr. Gaynor. "It could just be, unfortunately, that Braddock isn't a large enough community anymore to support a freestanding hospital facility."

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