News Release - Non-General Acute Care Facilities Volume Two

FOR IMMEDIATE RELEASE

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

UTILIZATION, GROWTH, PROFITS SURGE AT OUTPATIENT SURGERY CENTERS; REHAB HOSPITALS STAGE FINANCIAL COMEBACK

Harrisburg, PA - August 27, 2004 - The number of ambulatory (outpatient) surgery centers (ASCs) licensed in Pennsylvania, as well as the utilization of their services, has grown significantly in recent years, according to a new report from the Pennsylvania Health Care Cost Containment Council (PHC4). Between July 2003 and May 2004, 48 new ASCs opened, bringing the total to 161. In just two years, patient visits to ASCs increased 83%, from 279,335 during Fiscal Year 2001 (FY01) to over a half-million (501,781) during Fiscal Year 2003 (FY03). ASCs remained highly profitable in FY03, with average operating margins increasing from 12.19% in FY02 to 15.94% in FY03.

“A significant percentage of outpatient surgical and diagnostic procedures have shifted from General Acute Care hospitals to freestanding surgery centers,” noted Marc P. Volavka, Executive Director of PHC4. “Nearly one-fifth (19%) of the outpatient surgical and diagnostic procedures performed in FY03 were performed at ASCs, up from 9% in FY00.”

In addition to ambulatory surgery centers, Financial Analysis 2003, Volume Two reports on the financial health of other non-General Acute Care facilities including rehabilitation, psychiatric, long-term acute, and specialty hospitals.

Rehabilitation hospitals experienced an unprecedented growth in net income during FY03. After a 6.5-point decline during FY02, the statewide average total margin increased sharply from 1.78% during FY02 to 10.87% in FY03. This improvement was driven primarily by an increase in statewide net patient revenue - largely the result of a $53 million increase in Medicare indemnity revenue under the new Medicare Prospective Payment System (PPS). Rehabilitation hospitals also reduced their operating expenses during the same period.

Psychiatric hospitals continued to struggle in FY03, posting a negative statewide average operating margin for nine consecutive years. These hospitals have only realized a positive statewide total margin in three of the last ten years. In FY03, the average operating margin was -1.77% and the average total margin was -0.97%. However, the financial performance of the 17 psychiatric hospitals varied widely, with total margins ranging from -17.01% to 17.57%.

The Pennsylvania Health Care Cost Containment Council (PHC4) is an independent state agency charged with collecting, analyzing and reporting information that can be used to improve the quality and restrain the cost of health care in Pennsylvania. Copies of Financial Analysis 2003, Volume Two are free and are available on the Council’s website at http://www.phc4.org or by calling PHC4 at 717-232-6787.