Top Health Care: Smaller health systems finding ways to thrive

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With all the back and forth between Highmark and UPMC the past year over Highmark's bid to acquire the West Penn Allegheny Health System, it's sometimes easy to forget there are other hospitals out there -- and many of them are doing quite well.

In the Post-Gazette's yearly listing of top revenue earners, Highmark and UPMC still lead the way by a wide margin: $14.8 billion in total revenue in 2011 for Highmark, up from $14.4 billion; and $9 billion for UPMC, compared with $8.1 billion in 2010. Only West Penn Allegheny Health System ($1.6 billion, slightly lower than a year ago) broke through into the billion-dollar club as well.

But two outlying health systems -- Excela in Westmoreland County and Heritage Valley, which has hospitals in Sewickley and Beaver -- are generating a half-billion dollars in revenue yearly, followed by a large dose of vibrant suburban centers: The Washington Hospital ($280 million), Jefferson Regional Medical Center ($271.3 million), Butler Health System ($248.2 million), and St. Clair Health Corp. ($238.19 million).

Among that group, Washington Hospital and Jefferson Regional had the biggest year-over-year revenue increases of about $20 million each.

Jefferson's approach is reflective of a trend seen throughout the industry.

JoAnne Hahey, chief financial officer at Jefferson, says its increase in revenue is largely due to an increase in patient volume -- in part from the purchase of key physician practices but also due to the health system's expanded reach into the community.

"Ours is truly volume growth."

Over the past 18 months, they've set up 20 or so imaging centers, labs, X-ray and CT stations, physical and occupational therapy centers in places such as Bethel Park, Brentwood, Charleroi and Belle Vernon. "We're really focusing on providing the care our patients deserve in their communities," said Ms. Hahey.

Providing services in neighborhoods away from the main campus and its skyscraper is a strategy many health care organizations are employing -- including UPMC and Highmark.

In setting up networks to compete with each other, the two health giants are making inroads into areas that community-based hospitals have previously had to themselves. With UPMC setting up satellite cancer treatment centers and Highmark's plans for a network of community patient centers, "Our fear is that we (community-based, independent hospitals) will be collateral damage," Mrs. Hahey said.

Every hospital, though, is feeling the pressure of an economy that is stubbornly slow to recover. With more people out of work, more have lost their health insurance and have no money to cover hospital bills, so hospitals end up absorbing the cost.

Ultimately, Ms. Hahey said, the remaining independent hospitals may find it harder to remain independent but she believes the demand for quality care in a community setting will endure.

Five years from now, she said, "I don't know if the ownership structure will stay the same, but this building will still be here and we will still be providing excellent quality care in the community."


Steve Twedt: stwedt@post-gazette.com or 412-263-1963.


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