Hospitals’ profit margin down
Many local hospitals fared better than that state average when it came to operating margins last year, according to a report released Thursday by the Pennsylvania Health Care Cost Containment Council.
Hospitals statewide saw an average drop in total margin from 6.63% in 2019 to 3.9% in 2020. Operating income also fell from $2.8 billion in 2019 to $1.9 billion in 2020.
Hospital profits for 2020
St. Luke’s Miners
Total Margin: 16.76%
Operating Margin: 16.81%
Percent of Uncompensated Care: 1.66%
Net Patient Revenue: $81 million
Operating Expenses: $74 million
St. Luke’s Gnaden Huetten
Total Margin: -5.53%
Operating Margin: 5.06%
Percent of Uncompensated Care: 1.52%
Net Patient Revenue: $68 million
Operating Expenses: $71 million
Lehigh Valley Schuylkill
Total Margin: -14.06%
Operating Margin: 0.8 %
Percent of Uncompensated Care: 2.15%
Net Patient Revenue: $122 million
Operating Expenses: $127 million
Lehigh Valley Allentown
Total Margin: 5.75%
Operating Margin: 4.12%
Percent of Uncompensated Care: 0.91%
Net Patient Revenue: $1.924 billion
Operating Expenses: $2.02 billion
Lehigh Valley Hazleton
Total Margin: 9.8%
Operating Margin: 6.99%
Percent of Uncompensated Care: 3.37%
Net Patient Revenue: $114 million
Operating Expenses: $112 million
Lehigh Valley Pocono
Total Margin: 18.84%
Operating Margin: 18.1%
Percent of Uncompensated Care: 3.88%
Net Patient Revenue: $243 million
Operating Expenses: $215 million
St. Luke’s Monroe
Total Margin: 13.05%
Operating Margin: 14.31%
Percent of Uncompensated Care: 1.21%
Net Patient Revenue: $157 million
Operating Expenses: $146 million
“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 the Pennsylvania Health Care Cost Containment Council. “Many hospitals will face serious financial challenges as Pennsylvania works to mitigate the fiscal impact of the epidemic.”
The operating margin represents revenue received for patient care minus related expenses. The total margin includes the operating margin plus revenue and expenses for all other facets of the acute care hospital activity. Revenue included in total margin would also factor in investment income, endowments, charitable contributions, and other revenue not directly related to patient care.
Locally, St. Luke’s Miners posted a 16.76% total margin and 16.81% operating margin in 2020 with St. Luke’s Gnaden Huetten at a negative 5.53% total margin and a 5.06% operating margin. Lehigh Valley Health Network Schuylkill posted a negative 14.06% total margin and a 0.8% operating margin, while Lehigh Valley Allentown had a 5.75% total margin and a 4.12% operating margin. Lehigh Valley Hazleton had a 9.8% total margin and a 6.99% operating margin and Lehigh Valley Pocono had an 18.84% total margin and an 18.1% operating margin. St. Luke’s Monroe had a 13.05% total margin and a 14.31% operating margin.
“In fiscal year 20, 38% of Pennsylvania hospitals posted a negative operating margin, and 18% of Pennsylvania hospitals posted an operating margin between 0% and 4%,” said Martin. “38% of Pennsylvania hospitals posted a negative total margin and 17% of Pennsylvania hospitals posted a total margin between 0% and 4%. These are very troubling indicators.”
Net patient revenue reflects revenue for patient care only and does not include revenue from other operations such as cafeteria, parking, rent, research and educational activities.
“The revenue hospitals received for patient care decreased 2% during 2020,” the report states. “Statewide net patient revenue was $46.8 billion during 2020, making up 91% of statewide hospital total operating revenue.”
Net patient revenue decreased from $88 to $81 million for St. Luke’s Miners from 2019 to 2020, stayed at $68 million for St. Luke’s Gnaden Huetten, decreased from $135 to $122 million for Lehigh Valley Schuylkill, increased from $1.923 to $1.924 billion for Lehigh Valley Allentown, decreased from $118 to $114 million for Lehigh Valley Hazleton, decreased from $251 to $243 million for Lehigh Valley Pocono, and increased from $153 to $157 million for St. Luke’s Monroe.
The percent of uncompensated care is the ratio of uncompensated care (charity care and bad debt) to the total care provided by the hospital. Charity care is the care a hospital provides without charge because the patient is unable to compensate the hospital through third-party coverage or the patient’s own resources.
Bad debt represents the foregone revenue for care in which the hospital initially anticipated payment, extended credit to the patient, but later was determined to be uncollectable.
The statewide percentage of uncompensated care to net patient revenue increased from 1.72% in 2019 to 1.73% in 2020.
The percent of uncompensated care for 2020, according to the report, was 1.66% for St. Luke’s Miners, 1.52% for St. Luke’s Gnaden Huetten, 2.15% for Lehigh Valley Schuylkill, 0.91% for Lehigh Valley Allentown, 3.37% for Lehigh Valley Hazleton, 3.88% for Lehigh Valley Pocono and 1.21% for St. Luke’s Monroe.