Hospital Bottom Lines Rebound

Hospital finances in Pennsylvania fared better in 2010 than they have since 2008.

The latest report from the Pennsylvania Health Care Cost Containment Council (PHC4) finds total operating margins at hospitals statewide rebounded last year to 5.26% after falling to 2.03% in 2009. PHC-4 spokesperson Stephanie Suran says more of the increase can be traced to a stronger economy and a rebounding stock market than to more stable operations. “Most of the increase can be attributed to an $883 million increase in non-operating income,” says Suran. That was about three quarters of the total increase in income.

Non-operating income includes, among other things, charitable contributions and growth in endowment investments. Looking solely at operating income, margins moved from 3.53% in 2009 to 4.36% in 2010. Operating margins at southwestern Pennsylvania hospitals were slightly lower overall than the statewide numbers.

Suran says many hospitals work on such tight margins that the small increase on average was enough to push many hospitals into the black. “About one quarter of hospitals in Pennsylvania lost money in 2010, this is an improvement from the previous year when 45 percent of the state’s hospitals had negative bottom lines,” says Suran.

The cost of uncompensated care continued to pull down the margins. Pennsylvania hospitals lost $891 million dollars to uncompensated care last year. Suran says much of that can be traced to uninsured patients. Rates for uncompensated care were slightly lower in the counties surrounding Allegheny County than in the rest of the state.

PHC4 began tracking hospital data in 1996. Since then the trend has been for increased operating margins with dips from 1997 to 2001 and again from 2007 to 2010. Uncompensated care dipped through the first part of the 2000’s but has been steadily rising since it hit a trough in 2005.

The study also includes hospital stay data. Statewide inpatient days dropped from 9.39 last year to 9.14 in 2010. The statistic has been on a steady decline since 1996 when it stood at nearly 11 days. The same trend can be found when it comes to length of stay. The average hospital stay in Pennsylvania was 6.04 days in 1996 and has fallen to 5.22 in 2010.

The full report can be found here.