AP NEWS

Report: Commonwealth Hospitals Struggling Financially

May 14, 2019

All but one Commonwealth Health hospital lost money in 2018, according to an analysis of hospital financial health across Pennsylvania.

Only Moses Taylor Hospital in Scranton showed a positive total margin of 2.8%, according to the Financial Analysis 2018 report released today by the Pennsylvania Health Care Cost Containment Council.

The independent organization, which was created by the state legislature to inform policy decisions and curb growing health care costs, uses self-reported data from hospitals and health systems.

The report examines the financial health using patient revenue, operating expenses, operating margins and total margins for the state’s 168 general acute care hospitals.

Regional Hospital of Scranton, Wilkes-Barre General Hospital and Tyler Memorial Hospital in Tunkhannock Twp. all posted negative total margins, meaning the money they spent exceeded revenue directly from patient care and other sources including investment gains, trust income and contributions.

For-profit health systems, such as Commonwealth, arguably have fewer revenue sources and a heavier financial burden.

The for-profit health system pays an estimated $18 million in taxes annually, spokeswoman Annmarie Poslock said in an email.

“It is important to note in these comparisons that nonprofit hospitals do not pay taxes and are able to secure income through donations,” she said.

The 2018 financial analysis follows daunting first-quarter results for Commonwealth’s Tennessee-based parent company, Community Health Systems.

CHS reported declining patient revenue and posted a net loss attributable to shareholders of $118 million.

The company sold 21 hospitals over the last year, bringing its total number of hospitals to 106, and continues its strategy with a number of potential buyers, the April 30 financial report says.

Which hospitals may be under contract for sale were not disclosed.

Picture of health

Total margins paint a picture of a hospital’s overall financial health.

Negative margins show that, after adding up all revenue streams, a hospital is losing money, the report says.

All Geisinger’s hospitals in the region posted positive total margins.

Geisinger Wyoming Valley Medical Center, Plains Twp., reported one of the highest total margins, almost 16%, with net patient revenue of $560 million, up $42 million from 2017. Net operating expenses were $482 million, up $17 million from the previous year.

With the exception of Wayne Memorial Hospital in Honesdale, rural hospitals trend toward financial struggle.

Barnes-Kasson Community Hospital in Susquehanna County reported a minus 2.6% margin; Endless Mountains reported the largest negative margin, minus 12.19%, for the northeast region.

Endless Mountains also reported the largest share of Medicare reimbursement, more than 58%, and the second highest share of uncompensated care, nearly 5%.

Medicare and Medicaid pay less than private insurance companies.

A higher percentage of revenue from those sources suggests hospitals treat older, sicker and poorer patients who summon less revenue than if they had more patients with private insurance.

Medicare’s share of net patient revenue statewide is 34.89%.

‘Rainy day fund’

Like the other rural hospitals, Wayne Memorial sees a higher-than-average share of uncompensated care and Medicare revenue than the rest of the state. With that in mind, Chief Executive Officer David Hoff said it’s important to think outside the box.

The health system over the years has built what he called a “rainy day fund” in stock and equity investments that help diversify its portfolio.

“As time goes on, reimbursement’s going to get tighter and tighter,” he said. “We’ve been trying to let our investment pool grow a little bit.”

Wayne Memorial seeks ways to stay competitive with more urban hospitals.

For example, the health system recently opened a cardiac catheterization lab so it can treat heart attack patients. It also recently received Level IV trauma status, which means ambulances carrying people with more serious injuries no longer zip by on their way to Geisinger Community Medical Center in Scranton, the next-closest trauma center.

Only Barnes-Kasson had a higher share of uncompensated care in the northeast region of 6.27%. Statewide, the average for uncompensated care is 1.66%.

“The statewide percent of uncompensated care to net patient revenue has been steadily decreasing for the past five years,” PHC4 Executive Director Joe Martin said in a statement.

Uncompensated care — otherwise called charity care or uncollectible debt because hospitals don’t get paid — has been on the decline statewide since 2013. In 2018 it dropped nearly 2%, or $16 million, to 1.66%.

Despite less charity care, hospitals still saw their total margins shrink less than 1% compared to 2017.

Contact the writer:

joconnell@timesshamrock.com

570-348-9131; @jon_oc