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News Release: New Report Details Increasing Financial Instability of Pennsylvania Hospitals

May 14, 2019

A new report demonstrates the need for continued state support for financially fragile hospitals in Pennsylvania. The Pennsylvania Health Care Cost Containment Council’s (PHC4) fiscal year (FY) 2018 financial analysis reveals that average operating margins are decreasing, despite a small increase in overall revenue.

The PHC4 FY 2018 financial analysis of general acute care (GAC) hospitals found that:

  • Pennsylvania hospitals’ average statewide operating margins (operating revenue minus operating expenses) decreased, from 5.15 percent during FY 2017 to 4.76 percent during FY 2018. Statewide total margins also decreased, from 6.67 percent during FY 2017 to 6.62 percent during FY 2018. The decreased margins are despite a 3.9 percent increase in revenue
  • Sixty-six (39%) GAC hospitals posted negative operating margins, representing an increase from 62 (37%) during FY 2017. Fifty-three (32%) GAC hospitals posted negative total margins, representing a decrease from 56 (33%) during FY 2017. Fifty-one (30%) GAC hospitals posted negative three-year average total margins, representing an increase from 50 (30%) during FY 2017
  • Uncompensated care has remained mostly flat ($750 million during FY 2018). This represents a modest decrease from 1.76 percent of net patient revenue during FY 2017 to 1.66 percent during FY 2018

“The latest PHC4 report underscores the need to preserve a strong hospital community to provide the best possible care to Pennsylvanians and their families. Hospitals need resources to continuously invest in their physical plant, update technology, or hire personnel to address clinical shortages,” said Andy Carter, president and CEO of The Hospital and Healthsystem Association of Pennsylvania (HAP).

“If hospitals do not receive adequate state and federal support for Medicaid, Medicare, and programs that bolster access to care for the uninsured, their ability to provide critical care and other services for our communities will be undermined. Despite the clear case being made by this report, we are now even more concerned that some in the General Assembly want to cut funding for uncompensated care in the Tobacco Settlement Fund.”

The 2017–2018 state budget allowed for the monetization of future funds received through the Master Tobacco Settlement Agreement in order to generate a one-time sum of $1.5 billion for balancing the state budget. A debt payment of $115 million now is due, and funding for public health programs, research grants, and safety nets for high-need patients could be in jeopardy as a result.

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