Contact: Joe Martin
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PENNSYLVANIA HOSPITAL MARGINS EXPERIENCE A SIGNIFICANT DECREASE IN FISCAL YEAR 2020, ACCORDING TO A NEW PHC4 HOSPITAL FINANCIAL REPORT

Harrisburg, PA - June 3, 2021 - The statewide total margin realized by the hospitals in Pennsylvania decreased by 2.70 percentage points, from 6.63% in fiscal year 2019 (FY19) to 3.93% in FY20, and the statewide operating margin decreased 1.89 percentage points from 5.61% in FY19 to 3.73% in FY20. The statewide operating income for Pennsylvania hospitals decreased from $2.8 billion in FY19 to $1.9 billion in FY20.

“This significant change in operating and total margins reflects the financial impact on hospitals due to the pandemic COVID 19 crisis,” said Joe Martin, executive director for the Pennsylvania Health Care Cost Containment Council (PHC4). “Many hospitals will face serious financial challenges as Pennsylvania works to mitigate the fiscal impact of the epidemic.”

For the fiscal year ending June 30, 2020, Pennsylvania general acute care hospitals’ uncompensated care (combination of bad debt and charity care) has decreased in FY20 from $820 million in FY19 to $809 million, a decrease of 1.4%, in FY20.

“In FY20, 38% of Pennsylvania hospitals posted a negative operating margin, and 18% of Pennsylvania hospitals posted an operating margin between 0% and 4%,” said Mr. Martin. “38% of Pennsylvania hospitals posted a negative total margin and 17% of Pennsylvania hospitals posted a total margin between 0% and 4%. These are very troubling indicators.”

The operating margin represents revenue received for patient care minus related expenses. The total margin includes the operating margin plus revenue and expenses for all other facets of the acute care hospital activity. Revenue included in total margin would also factor in investment income, endowments, charitable contributions, and other revenue not directly related to patient care.

Report highlights:

• Uncompensated Care: The statewide percentage of uncompensated care to net patient revenue increased from 1.72% in FY19 to 1.73% in FY20. The foregone dollar value for statewide uncompensated care has decreased from $820 million in FY19 to $809 million in FY20.
• Net Patient Revenue: The revenue hospitals received for patient care decreased 2.0% during FY20. Statewide net patient revenue was $46.8 billion during FY20, making up 91% of statewide hospital total operating revenue.
• Operating Margin: Statewide operating income decreased from $2.8 billion in FY19 to $1.9 billion in FY20. As a result, the statewide average operating margin decreased from 5.61% in FY19 to 3.73% in FY20. Total operating revenue increased to $51.5 billion and operating expenses increased to $49.6 billion in FY20.
• Total Margin: The statewide total margin realized by the hospitals decreased by 2.70 percentage points, from 6.63% in FY19 to 3.93% in FY20.

The Volume One Financial Analysis 2020 of General Acute Care hospitals is the first of a three part series of reports PHC4 publishes annually. Volume Two focuses on Ambulatory Surgery Centers and Volume Three on non-GAC hospitals, which will be released later this year.

PHC4 is an independent state agency charged with collecting, analyzing and reporting information about the cost and quality of health care in Pennsylvania. Copies of Financial Analysis 2020, Volume One are free and available from PHC4’s website at www.phc4.org.