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Harrisburg, PA - May 14, 2010 - The statewide total margin realized by Pennsylvania’s 167 general acute care (GAC) hospitals decreased by 2.62 percentage points in Fiscal Year 2009 (FY09), falling from 4.70% in FY08 to 2.08% in FY09, according to new figures released by the Pennsylvania Health Care Cost Containment Council (PHC4). The bulk of the $865 million decrease in statewide net income was the result of a $764 million decline in non-operating income – from a positive $252 million in FY08 to a negative $512 million in FY09. Non-operating income is derived primarily from investments in stocks and bonds, the value of held securities, endowments and charitable contributions.
“In FY09, the financial health of Pennsylvania hospitals deteriorated as hospitals struggled with ailing investments and rising uncompensated care,” said Joe Martin, PHC4’s Executive Director. “Overall, hospitals continue to be affected by these difficult economic times.”
On a statewide basis, GAC hospitals provided a total of $807 million in uncompensated care in FY09, up 7.9% from $748 million during FY08. Since statewide uncompensated care grew faster than the 5.6% increase in net patient revenue (NPR), uncompensated care as a percentage of NPR rose from 2.37% in FY08 to 2.43% in FY09. This is the highest percentage reported since 2.46% in FY01.
Statewide operating income decreased from $1.33 billion in FY08 to $1.23 billion in FY09. As a result, the statewide average operating margin fell from 3.99% in FY08 to 3.52% in FY09. Operating margin reflects what hospitals earn from patient care and related operations, such as medical education and office rent. Total margin includes both operating and non-operating income.
Total operating expenses increased about 5.0% from $32.05 billion in FY08 to $33.66 billion in FY09. Total operating revenue grew about 4.5% from $33.38 billion in FY08 to $34.89 billion in FY09.
Seventy-three – or 44% – of the 166 individually reporting GAC hospitals reported a negative total margin in FY09. In FY08, 51 hospitals (out of 169) – or 30% – posted a negative total margin.
The number of hospitals with a negative operating margin increased from 55 in FY08 to 57 in FY09. For these hospitals, operating expenses were greater than their revenue from patient care and other operations. Among the 57 hospitals with operating losses, 43 or 75% were smaller hospitals with annual net patient revenues below $150 million.
The number of hospitals that sustained average losses over the last three years increased from 40 at the end of FY08 to 43 at the end of FY09. The number of hospitals with three-year average total margins in the 0% to 2% range grew from 32 to 41. At the other end of the spectrum, the number of hospitals with three-year average total margins over 8% dropped from 27 to 20.
PHC4 is an independent state agency charged with addressing the cost and quality of health care in Pennsylvania. Copies of Financial Analysis 2009, Volume One are free and available online at http://www.phc4.org.
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