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Hospital Income Slips in PA, But Most Are in the Black

The average hospital in Pennsylvania made money in the fiscal year that ended June 30, 2012, but not as much as they did the year before and not enough to make the Pennsylvania Health Care Cost Containment Council (PHC4) confident about the future.

The PHC4 released its annual study Wednesday, which found the 171 General Acute Care hospitals in the state realized on average a 5.82 percent operating margin in 2011-2012. That was down from 7.04 percent the year before but above the industry benchmark of 4 percent for a healthy hospital.

Of most concern to PHC4 spokesperson Paul Hambke was the increase in uncompensated care. 

“Hospitals are now providing more than $1 billion in uncompensated care, which is care that is provided but unpaid for,” he said.

Most often the uncompensated care either comes from individuals who never pay their bills or from the gap between the real cost of providing a service and the reimbursement rate provide for under the Medicare and Medicaid programs.

“We really need to work hard to protect hospital payments in the upcoming state budget if we are going to preserve patient access to care,” Hambke said.

Uncompensated care levels have increased 121 percent in the last 10 years according to the report. The report also found that net income to hospitals fell by $391 million from FY11 to $2.30 billion in FY12. Hambke worries that those numbers will continue to fall if payments from state and federal programs are cut.

“Hospitals are facing more than $8 billion in cuts from health care reform, another $1.5 billion from the congressional sequestration,” said Hambke, who called the situation “stable but precarious” heading into FY13.

About a quarter of the hospitals in the state are losing money, according to the study, but there is no trend as to what type of hospital is in the red. Rural and urban hospitals are just as likely to be suffering, and the same holds true for large and small facilities.

However, hospitals with large endowments or substantial incomes not related to patient care had to rely more on their patient-related income streams. Overall, non-operating income declined by $517 million statewide, while income from hospital operations increased by $126 million in FY12, according to the annual PHC4 study.