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News Release: PHC4 Report Underscores Need for Financially Strong Hospital Community

May 08, 2018

Pennsylvania’s hospitals and health systems are working to address a rapidly changing health care landscape, caring for a growing aging population, addressing chronic disease management and the opioid crisis, and working to better integrate behavioral health care and population health. The industry is a leading economic driver and community anchor, providing more than $121 billion to the state’s economy during fiscal year (FY) 2016. The latest analysis from the Pennsylvania Health Care Cost Containment Council (PHC4) underscores the need for the hospital community to remain financially strong.

The PHC4 FY 2017 financial analysis of general acute care (GAC) hospitals found that:

  • Pennsylvania hospitals’ average statewide operating margins (operating revenue minus operating expenses) decreased, from 6.02 percent during fiscal year (FY) 2016 to 5.15 percent. Statewide total margins increased from 5.96 percent during FY 2016 to 6.62 percent during FY 2017
  • Sixty-two (37%) GAC hospitals posted negative operating margins; representing an increase from 51 (30%) during FY 2016. Fifty-seven (34%) GAC hospitals posted negative total margins; representing an increase from 49 (29%) during FY 2016. Fifty (30%) GAC hospitals posted negative three-year average total margins, representing an increase from 44 (26%) during FY 2016
  • Uncompensated care as a percent of net patient revenue continues to trend downward: 2.01 percent during FY 2016 to 1.74 percent during FY 2017. Uncompensated care has decreased by 29 percent since FY 2014, which was the year the Affordable Care Act was implemented

“The PHC4 financial analysis provides a valuable snapshot in time, but in two short years, the health care landscape has radically changed again,” said Andy Carter, president and CEO of The Hospital and Healthsystem Association of Pennsylvania (HAP).

“Hospitals and health systems are working to implement innovative technological advances, including telemedicine; stepping in to help address more social challenges, such as food insecurity and homelessness; conducting industry-leading research; and, making efforts to improve the health of all Pennsylvanians—keeping them out of hospitals altogether. The opioid crisis has worsened during this period, and we are finally making inroads through new models of care and community partnerships. For this work to continue, the hospital community’s financial outlook must remain strong, and funding must be predictable.”

Carter noted that Pennsylvania’s hospitals and health systems are proud to serve as partners in caring for their communities, and with state government to help address previous budget shortfalls. During 2010, the hospital and health system community voluntarily stepped up to provide funds for a state budget deficit through a hospital tax, the Quality Care Assessment (QCA). Hospitals and health systems were one of only a few groups to make such a commitment, and it has ensured that taxpayers do not have to fill budget gaps through general tax increases. Despite being paid well below cost for their services, since the QCA’s 2011 implementation, hospitals have provided more than $1 billion to the state’s general fund.

The governor's 2018–2019 budget proposal calls for a $130 million increase above hospitals’ current contribution of $220 million in the existing QCA law. This amount represents a tax increase of 60 percent, an increase that is unsustainable for any entity. 

“To continue to provide high-quality, cutting-edge care—and to innovate—hospitals need sustained support for critical access hospitals, burn and trauma centers, obstetric services and neonatal intensive care units, as well as resources to address the opioid crisis. Without this support—and if taxes levied through the QCA are increased at unfair rates—some hospitals may have to make difficult choices about their futures, and this will impact many lives, including vulnerable populations,” Carter concluded.

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