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Harrisburg, PA - May 17, 2012 - The statewide total margin realized by the 168 General Acute Care (GAC) hospitals in Pennsylvania increased during the fiscal year that ended June 30, 2011, rising by 1.67 percentage points, from 5.26% to 6.93%, according to a report released today by the Pennsylvania Health Care Cost Containment Council (PHC4). The value of care for which hospitals were not compensated — either bad debt or charity care — grew by 11.2 percent in FY 11, or about $99 million, from $891 million the prior year to $990 million.
“The improved financial picture, after several years of decline during the national economic downturn, is a positive sign,” said Joe Martin, Executive Director of PHC4. “However, the rising cost to hospitals of providing uncompensated care bears watching.”
Overall net income grew by $769 million, from $1.92 billion in Fiscal Year 2010 (FY 10) to $2.69 billion in FY 11. Of that, $551 million, or 72 percent, came from improvement in operating income; the remaining $218 million came from non-operating income. Operating income comprises patient care and a variety of related functions such as medical education, cafeteria services, parking, and community health services. Non-operating income often includes such things as investment gains, trusts or endowments, and contributions.
With the $551 million gain in operating income, from about $1.58 billion in FY 10 to $2.13 billion in FY 11, the statewide average operating margin grew from 4.37% to 5.58%.
Both the number and the percentage of hospitals that lost money declined in FY 11. Last year, 33 hospitals, or 20 percent, posted a negative total margin. The previous year, 39 hospitals, or 24 percent of those reporting, had a negative total margin. Those figures had been significantly higher in FY 09, when 74 hospitals, or 45 percent, were in the red.
The number of hospitals that sustained a three-year average loss declined to 37, or 23 percent, by the end of FY 11. For the three-year period ending in FY 10, a negative average total margin hit 41 hospitals.
“The financial condition of hospitals over the long term is important, because they must be sound and have adequate resources to provide high quality patient care,” Martin said.
The 165 GAC hospitals included in the analysis collectively posted an increase in operating revenue of $2.07 billion, or 5.7%, from FY 10 to FY 11, while operating expenses increased by $1.52 billion, or 4.4%. The number of hospitals with negative operating margins declined from 54 in FY 10 to 44 in FY 11. Of those, 35 were smaller hospitals with less than $150 million in net patient revenue.
The Volume One financial analysis of GAC hospitals is the first of three that PHC4 publishes annually. Volume Two on Ambulatory Surgery Centers and Volume Three on non-GAC hospitals will appear later this year.
The Pennsylvania Health Care Cost Containment Council 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 2011, Volume One are free and available on the Council’s website at http://www.phc4.org.
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