A recent report presents a rosy picture of the financial health of state hospitals, but health networks and health sector groups claim to be in much worse shape than the report appears.
Statewide, hospital patient net revenue was $ 49.9 billion in fiscal 2021, about 7% up from fiscal 2020, according to Pennsylvania Health Care Cost’s annual financial analysis. Containment Council.
Locally, the Lehigh Valley Health Network had patient revenue of $ 2.7 billion, while St. Luke’s University Health Network had about $ 1.9 billion, the report said.
The report appears to show that most of the state’s hospitals, including those run by St. Luke’s and LVHN, ended fiscal year 2021 with very healthy operating and total margins, the differences between income and expenses.
The increase in margins from 2020 to ’21 reflected government COVID-19 relief funding and strong investment performance, said Barry Buckingham, executive director of PHC4.
But LVHN, St. Luke’s, and the Hospital and Healthcare Association of Pennsylvania argue that these margins are inflated. According to HAP, the reported COVID relief payments in fiscal year 2021 were actually intended to help recover the previous year’s losses.
And the significant gains on investments made due to a market surge in fiscal year 2021, according to HAP, were likely wiped out by the most recent market downturn. HAP also said the PHC4 ratio does not reflect the losses suffered by the hospital-owned medical practices during the pandemic. Buckingham said he agreed with HAP on these points.
Thomas Marchozzi, LVHN’s chief financial officer, said the margins in the PHC4 report were completely out of proportion. The PHC4 report shows that LVH-Schuylkill and Coordinated Health Allentown and Bethlehem had operating margins ranging from 13% to 40%, but Marchozzi said those numbers are simply wrong.
“The idea that LVH-Schuylkill has achieved an operating margin of 13.4% is simply ridiculous,” said Marchozzi. “It has a mix of poor taxpayers, a shortage of doctors, a decrease in volume and they literally lost money last year and are expected to lose money again this year. Coordinated Health Bethlehem had a 39.92% operating margin? They barely even broke even. The only reason we took them over in 2019 was because they were losing money. “
However, all hospitals run by St. Luke’s and LVHN saw net patient revenues increase from 2020 to 2021, although the amounts varied widely.
Chad Meyerhoefer, a professor of economics at Lehigh University, said one possible reason for the increase in patient profits is that the average length of patient stays increased in 2021. According to the report, the increase has gone from one stay average of 5.4 days to about 5.7 but Meyerhoeffer said even a few more hours can be quite expensive.
“Even if you’re increasing it by three or four hours, combined at all the hospitals in the state, that’s a lot of money,” Meyerhoefer said.
LVHN made more money from patients overall: Lehigh Valley Hospital-Cedar Crest, LVH-Allentown and LVH-Muhlenberg brought in just under $ 2.1 billion, more than St. Luke’s Pennsylvania hospitals combined.
However, St. Luke’s has seen its patients’ profits grow at a much faster rate, about 21% among all of its Pennsylvania hospitals compared to LVHN’s 10% increase. Some St. Luke’s hospitals have seen even greater increases in patient revenue year-over-year: Anderson Campus in Bethlehem Township saw profits rise 30% and the Lehighton campus grossed $ 87 million versus $ 68 million. dollars of the previous year.
Karen Boskan, a spokeswoman for St. Luke’s, said Anderson expanded hospital medical and surgical units and also added obstetrics services, resulting in a 40% increase in hospitalization and observation volumes. Meanwhile, Lehighton has seen an increase in surgical volumes and outpatient services, leading to growth in its revenues.
Although many hospitals and health networks have been hit hard by the pandemic, with some completely or nearly ruined, Meyerhoefer said he did not surprise so many hospitals in LVHN and St. Luke with healthy operating and total margins. She said that in addition to the stimulus provided by the government, many hospitals were able to quickly adapt operations to meet the needs and constraints created by the pandemic.
In an effort to save money during the early days of the pandemic, hospitals fired many employees and some fired.
Another report by PHC4, on the emergency COVID-19 disaster, highlights how significant the loss of revenue in 2021 was for hospitals and healthcare facilities. Across the state, hospitals lost approximately $ 1.4 billion due to COVID-19 related expenses and lost revenue streams.
From the start of the pandemic through March 2022, statewide losses totaled $ 7.6 billion, according to the report. But this does not reflect emergency funding provided by federal or state laws, including those of the CARES Act or the Paycheck Protection Program and Health Care Enhancement Act.
The PHC4 COVID disaster emergency report shows that COVID-19 has caused increases in hospital and health care expenses related to staffing, viral testing, supplies, equipment, construction, and in some cases housing.
Buckingham said one pandemic measure – adjustments to Medicare reimbursement rates for inpatient treatment of COVID-19 – likely did not play a role in increasing healthcare network patient revenues.
Even so, Medicare and medical care dollars accounted for a significant portion of both networks’ revenue.
LVH-Schuylkill had the largest share of patient income from Medicare and medical care with 64%. Right behind were St Luke’s-Lehighton (62%) and St. Luke’s-Sacred Heart in Allentown (about 60%).
Boskan attributed those percentages to poverty and a large aging population in the areas served by the Lehighton and Sacred Heart campuses. He said both hospitals also run relatively large behavioral health programs, which also increase the number of Medicare and medical care recipients.
Pennsylvania hospitals lost approximately $ 866 million, about 2% of net patient revenue, in fiscal year 2021 due to unpaid care, which the report defines as bad debt and charitable care, a standard that differs from health network criteria. This represented a 4% increase over the previous fiscal year. Most St. Luke’s and LVHN hospitals have lost a smaller percentage of patient income due to uncompensated care.
However, St. Luke’s-Easton (formerly Easton Hospital, in Wilson) lost $ 1 million, about 4% of patients’ net income, due to unpaid care. Boskan attributed this to the fact that it was the first year the Easton campus was under the umbrella of St Luke’s, which involved a significant amount of service realignment. The number of uncompensated care in the hospital has dropped, he said, but is still relatively high due to the demographics of the surrounding population.
“Uncompensated care is a significant concern for all hospitals, including St Luke’s,” Boskan said. “Of course we are also concerned about the impact that current inflation, the possible recession predicted by some economists and the eventual official cessation of funding for the COVID-19 public health emergency could have on future uncompensated care.”
Meyerhoefer said uncompensated care was a more significant problem before the Affordable Care Act, when more people were not insured. You said that the recent increase in uncompensated care was likely due to the loss of jobs and people’s insurance. Although many would have qualified for Medicaid or insurance plans on the state health insurance market, some may have fallen ill during the insurance transition.
Morning Call reporter Leif Greiss can be reached at 610-679-4028 or [email protected].