A recent report paints a rosy picture of the state’s hospitals’ financial health, but health networks and the health care industry say they’re in far worse shape than the report suggests.
According to the Pennsylvania Health Care Cost Containment Council’s annual financial analysis, hospitals had $49.9 billion in net patient revenue in fiscal year 2021, up about 7% from fiscal year 2020.
Locally, Lehigh Valley Health Network had $2.7 billion in patient revenue, and St. Luke’s University had about $1.9 billion, the report said.
The report appears to indicate that most hospitals in the state, including those operated by St. Luke’s and LVHN, ended fiscal 2021 with very good operating and overall profitability, the difference between income and expenses.
The increase in profitability from 2020 to 2021 reflects government funding for COVID-19 relief and strong investment results, said Barry Buckingham, chief executive of PHC4.
But LVHN, St. Luke’s and the Pennsylvania Hospital and Healthcare Association say those margins are inflated. According to HAPthe COVID relief payments reported in FY 2021 were actually intended to offset losses from the previous year.
And the significant investment gains from the market’s surge in FY21 have likely been wiped out by the latest market downturn, according to HAP. HAP also said that the PHC4 report did not reflect the losses incurred by doctors in hospitals during the pandemic. Buckingham said he agreed with HAP on those points.
Thomas Marcozzi, LVHN’s chief financial officer, said the margin in PHC4’s report was completely false. The PHC4 report shows that LVH-Schuylkill and Coordinated Health Allentown and Bethlehem had operating margins between 13% and 40%, but Marcozzi said those numbers are simply wrong.
“The idea that LVH-Schuylkill had an operating margin of 13.4% is just ridiculous,” Marcozzi said. “It has a poor payer mix, a shortage of doctors, declining volume, and they literally lost money last year and are projected to lose money again this year. Coordinated Health Bethlehem had an operating margin of 39.92%? They are barely even break-even. The whole reason we adopted them in 2019 was because they were losing money.’
However, all of St. Luke’s and LVHN saw increases in net patient revenue from 2020 to 2021, although the amounts varied widely.
Chad Meyerhofer, an economics professor at Lehigh University, said one possible reason for the increase in patient profits is that the average length of stay for patients increased in 2021. According to the report, the average length of stay increased from 5.4 days to about 5.7. but Meyerhoefer said even a few hours can be quite expensive.
“Even if you increase it by about three or four hours, totaled across all the hospitals in the state, that’s a lot of money,” Meyerhofer said.
LVHN made more money from patients overall, with Lehigh Valley Hospital-Cedar Crest, LVH-Allentown and LVH-Muhlenberg bringing in just under $2.1 billion, more than Pennsylvania’s St. Luke’s Hospitals combined.
However, income from patients St. Luke’s is growing at a much faster rate, about 21% among all Pennsylvania hospitals, compared to LVHN’s 10% growth. Some St. Luke’s hospitals saw even bigger increases in patient revenue each year, with the Anderson Campus in Bethlehem Township seeing a 30% increase in revenue and the Lehighton Campus bringing in $87 million, up from $68 million the previous year.
Karen Boscan, spokeswoman for St. Luke’s, said Anderson expanded the inpatient medical and surgical units and added obstetrics services, resulting in a 40% increase in inpatient and follow-up volumes. At the same time, Lehighton saw increases in surgical and outpatient services, which led to higher revenue.
While many hospitals and health care networks have been hit hard by the pandemic, with some completely or nearly destroyed, Meyerhofer said he was not surprised that many LVHN and St. Luke’s hospitals had healthy operations and overall margins. . He said that in addition to the incentives provided by the government, many hospitals were able to quickly adapt operations to meet the needs and constraints created by the pandemic.
To save money in the early days of the pandemic, hospitals laid off many employees and laid off some.
Another PHC4 report on Emergency with COVID-19, highlights just how significant the loss of revenue for hospitals and healthcare facilities was in 2021. Statewide, hospitals have lost an estimated $1.4 billion due to COVID-19-related costs and lost revenue.
From the start of the pandemic to March 2022, the total national losses were $7.6 billion, the report estimated. But it does not reflect emergency funding provided under federal or state laws, including the CARES Act or the Paycheck Protection Program and the Health Care Improvement Act.
PHC4’s report on the COVID-19 emergency shows that COVID-19 has led to increased costs for hospitals and healthcare facilities related to staffing, virus testing, materials, equipment, construction and, in some cases, housing.
Buckingham said one pandemic measure — adjustments to Medicare reimbursement rates for inpatient COVID-19 treatment — probably didn’t play a role in boosting the health networks’ patient revenue.
Even so, Medicare and health care dollars accounted for significant chunks of both networks’ revenue.
LVH-Schuylkill had the highest share of Medicare and Medicare patient revenue at 64%. Not far behind were St. Lux-Lehighton (62%) and St.
Boscan attributed those percentages to poverty and a large aging population in the areas served by the Lehighton and Sacred Heart campuses. She said both hospitals also run relatively large behavioral health programs that also increase the number of Medicare and Medicare beneficiaries.
In fiscal year 2021, Pennsylvania hospitals lost about $866 million, or about 2% of net patient revenue, to uncompensated care, which the report defines as bad debt and charity care, a standard that differs from the health networks’ own criteria. . This is 4% more than the previous fiscal year. Most St. Luke’s hospitals and LVHN lost a smaller percentage of patient revenue due to uncompensated care.
However, St. Luke’s-Easton (formerly Easton Hospital, in Wilson) lost $1 million, about 4% of its net patient revenue, due to uncompensated care. Boscan attributed this to the fact that he was the first year the Easton campus was under the auspices of St. Luke’s, which led to a significant amount of reorganization of services. She said the number of uncompensated hospital visits has decreased but is still relatively high due to the demographics of the surrounding population.
“Uncompensated care is a serious problem for all hospitals, including St. Luke’s,” Boscan said. “We are also, of course, concerned about how current inflation, the possible recession that some economists have been predicting, and the eventual formal end of emergency funding for COVID-19 health care could affect future uncompensated care.”
Meyerhofer said uncompensated care was a bigger problem before the Affordable Care Act, when more people were uninsured. He said the recent increase in uncompensated care is likely due to people losing their jobs and insurance. While many would be eligible for Medicaid or insurance plans in the public health insurance marketplace, some could get sick during the transition.
Morning Call reporter Leif Grice can be reached at 610-679-4028 or firstname.lastname@example.org.