Report Details Severe Financial Strain on Pa. Hospitals

June 27, 2024

More than half of Pennsylvania’s general acute care hospitals operated at a loss during fiscal year (FY) 2023 and only a third had at least the minimum margin needed to be sustainable in the long term.

The new financial analysis—released today by the Pennsylvania Health Care Cost Containment Council (PHC4)—paints the most dire picture of Pennsylvania hospital finances in recent memory. The share of hospitals operating in the red (51%) increased by 31 percent from what was already a high of 39 percent in FY 2022. The statewide average operating margin (2.26% for FY 2023) was slashed in half for the second consecutive year.

“This data underscores that Pennsylvanians’ access to health care is under significant threat as payments fail to keep up with the skyrocketing cost of providing care,” said HAP President and CEO Nicole Stallings. “Hospitals cannot continue to care for and serve the needs of their communities in the long term without stable financial footing.”

Here are some key takeaways from the FY 2023 data.

Unsustainable margins:  In addition to the more than half of hospitals operating at a loss, 15 percent of general acute care hospitals posted margins lower than 4 percent, which is considered the minimum to be financially sustainable in the long-term. That’s an increase from 13 percent in FY 2022.

Payor mix matters:  Hospitals that receive more than half their patient revenue from Medicare and Medicaid were more than twice as likely to have a negative operating margin. Among those hospitals operating in the red, 81 percent relied on Medicare and Medicaid for at least half of their net patient revenue (compared to 41 percent of those with a positive margin).

Concerning trend:  The share of hospitals with negative three-year total margins—which includes operating margin as well as other factors, such as investment gains/losses—increased to 33 percent for FY 2021–2023 from 27 percent for FY 2020–2022.

HAP is advocating at both the state and federal levels for policies to support struggling hospitals and ensure high-quality care remains accessible in Pennsylvania communities. This includes calling for state budget investments to strengthen rural health care and bolster maternal and infant care. 

PHC4’s report is available online.