Pennsylvania hospital margins thin following COVID-19

Pennsylvania hospitals saw a 33% loss in operating income as a result of the COVID-19 pandemic, according to a new fiscal report by the Pennsylvania Health Care Cost Containment Council (PHC4).

In a new report documenting the margins of hospitals throughout the state, PHC4 reported a decrease in operating income from $2.8 billion in fiscal year 2019 to $1.9 billion in fiscal year 2020, a decrease of 33% statewide.

PHC4’s annual report on the financial health of Pennsylvania hospitals, titled Financial Analysis 2020, used hospital data from 164 general acute-care hospitals licensed in the Commonwealth.

The report found that the total margin realized by Pennsylvania’s hospitals decreased by 2.7 percentage points, from 6.63% in fiscal year 2019 to 3.93% in fiscal year 2020. The statewide operating margin decreased 1.89 points from 5.61% to 3.73%, according to the report.

“This significant change in operating and total margins reflects the financial impact on hospitals due to the pandemic COVID 19 crisis,” said Joe Martin, executive director for PHC4. “Many hospitals will face serious financial challenges as Pennsylvania works to mitigate the fiscal impact of the epidemic.”

The number of hospitals that posted low or negative margins is a troubling indicator for hospitals moving forward, according to Martin.

“In fiscal year 2020, 38% of Pennsylvania hospitals posted a negative operating margin, and 18% of Pennsylvania hospitals posted an operating margin between 0% and 4%,” he said. “38% of Pennsylvania hospitals posted a negative total margin and 17% of Pennsylvania hospitals posted a total margin between 0% and 4%.”

Throughout the midstate, acute care hospitals saw either a decrease in net patient revenue (NPR) or an increase in operating expenses in fiscal year 2019 to 2020. NPR includes Medicare, Medicaid, commercial insurance and private pay.

Lancaster General Hospital saw a decrease in NPR from $1.07 billion in 2019 to $1.06 billion in 2020. Its operating expenses rose from $1.002 billion to $1.080 billion.

Across its many hospitals in the region, UPMC saw its NPR decrease from $1.54 billion in 2019 to $1.53 in 2020. Operating expenses increased from $1.42 billion to $1.43 billion.

WellSpan Health’s NPR increased from $1.816 billion in 2019 to $1.91 billion in 2020, throughout its hospitals. The York-based system’s operating expenses rose from $1.63 billion to $1.83 billion.

Penn State Health Milton S. Hershey Medical Center’s NPR also increased from $1.645 billion in 2019 to $1.668 in 2020. Its operating expenses increased from $1.54 billion to $1.68 billion