News Release - General Acute Care Facilities Volume One

FOR IMMEDIATE RELEASE

Contact: Joe Martin, Communications Director
717-232-6787 or

INCREASED PAYMENTS DRIVE HOSPITAL FINANCIAL IMPROVEMENTS

Harrisburg, PA - April 30, 2002 - The fiscal well-being of Pennsylvania’s General Acute Care (GAC) hospitals continued to improve through Fiscal Year 2001 (July 1, 2000-June 30, 2001), according to a new report released today by the Pennsylvania Health Care Cost Containment Council (PHC4). The $1 billion improvement in net patient revenue over the previous fiscal year stemmed mainly from payment increases for patient care by private insurers, Medicare, and the state’s Medical Assistance program.

“A combination of higher payment rates from third party payors and a continued focus on keeping expenses and unreimbursed costs under control has contributed to this improvement,” said Marc P. Volavka, Executive Director of PHC4.

“Even with this improvement, however, fully one-third of Pennsylvania hospitals lost money last fiscal year, and only 30% of Pennsylvania hospitals exceeded the national average of 4.5% for total margin,” cautioned Volavka.

In FY01, statewide operating revenue grew 5.7% to $19.9 billion, while operating expenses increased 4.5%, totaling $19.5 billion. Furthermore, for the first time in three years, operating income was higher than the income from non-operating sources such as investment income and contributions, with about 61% of hospital income earned from operations. Only 28% of hospital income came from operations in FY00.

Total net income (total margin), which includes both operating income and income from all other sources, also improved for the second consecutive year, increasing from 3.2% in FY00 to 3.4% in FY01. Despite the gains in statewide income, about 33% or 61 hospitals lost money in FY01. This was a slight improvement over FY00, when 35% or 66 hospitals had negative total margins

Uncompensated care, a combination of charity care and bad debt, decreased for the first time since FY97, dropping from 5.04% of NPR in FY00 to 4.66% of NPR in FY01. The dollar value of uncompensated care also declined by $18.5 million to $874 million - 2.1% lower than the FY00 figures. From FY97 to FY00, uncompensated care grew at an average annual rate of 8.1%.

“In terms of the drop in uncompensated care, appearances may be deceiving,” noted Mr. Volavka. “The decline may be partially attributable to changes in accounting policies, adjustments for previous over-accruals, and in particular, more precise reporting from hospitals due to the impact of Act 77.” Among other things, Act 77 provides for distribution of tobacco settlement monies to reimburse hospitals for providing uncompensated care. The annual uncompensated care levels reported to PHC4 are one of the factors used in determining eligibility for these funds.

The Pennsylvania Health Care Cost Containment Council is an independent state agency charged with collecting, analyzing and reporting information that can help to improve the quality and restrain the cost of health care in Pennsylvania. Copies of this report are free and can be ordered by calling the Council at 717-232-6787 or can downloaded from PHC4’s website at http://www.phc4.org.