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Harrisburg, PA - May 6, 2011 - After falling for two consecutive years, the statewide total margin realized by Pennsylvania’s general acute care (GAC) hospitals increased by 3.23 percentage points in Fiscal Year 2010 (FY10), according to new figures released by the Pennsylvania Health Care Cost Containment Council (PHC4). Statewide total margin increased from 2.03% in FY09 to 5.26% in FY10.
Statewide total net income grew from $696 million in FY09 to $1.92 billion in FY10. The bulk of this increase in statewide net income was the result of an $883 million improvement in non-operating income – from a negative $535 million in FY09 to a positive $348 million in FY10. Non-operating income is derived primarily from investments in stocks and bonds, the value of held securities, endowments and charitable contributions.
Statewide operating income increased from $1.23 billion in FY09 to $1.58 billion in FY10. As a result, the statewide average operating margin increased from 3.53% in FY09 to 4.36% in FY10. Operating margin reflects what hospitals earn from reimbursements for patient care and related operations. Total margin includes both operating and non-operating income.
The amount of uncompensated care hospitals provided grew to $891 million in FY10, up 8.0% from $825 million in FY09. Uncompensated care as a percent of net patient revenue also increased from 2.48% in FY09 to 2.59% in FY10 – the highest percentage reported during the last decade.
“Overall, the financial health of Pennsylvania hospitals improved primarily because of gains in the economy and the stock market,” said Joe Martin, PHC4’s Executive Director. “However, the cost to hospitals for providing uncompensated care continues to increase.”
Total operating revenue grew 3.7% from $34.84 billion in FY09 to $36.13 billion in FY10. Total operating expenses increased 2.8% from $33.61 billion in FY09 to $34.55 billion in FY10.
Thirty-eight – or 24% – of the 161 individually reporting GAC hospitals reported a negative total margin in FY10. In FY09, 74 hospitals (out of 166) – or 45% – posted a negative total margin.
The number of hospitals with a negative operating margin also decreased from 56 in FY09 to 53 in FY10. For these hospitals, operating expenses were greater than their revenue from patient care and other operations. Among the 53 hospitals with operating losses, 40 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 decreased from 43 at the end of FY09 to 41 at the end of FY10. The number of hospitals with a three-year average total margin in the 0% to 2% range decreased from 41 to 39. At the other end of the spectrum, the number of hospitals with a three-year average total margin over 8% increased from 20 to 23.
PHC4 is an independent state agency charged with addressing the cost and quality of health care in Pennsylvania. Copies of Financial Analysis 2010, Volume One are free and available online at http://www.phc4.org.
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