News Release - Financial Analysis 2002


Contact: Joe Martin, Communications Director
717-232-6787 or


Harrisburg, PA - February 14, 2003 - After two years of modest gains, hospital income fell off in Fiscal Year 2002 (FY02), according to new statewide figures released today by the Pennsylvania Health Care Cost Containment Council (PHC4). Total statewide non-operating income dropped sharply, falling from $265.6 million in FY01 to $46.5 million in FY02 - an 82% drop. Forty-one percent of the state's general acute care hospitals lost money in FY02 compared to 33% in FY01; 76 of 185 hospitals reported negative total margins during FY02. Fiscal Year 2002 runs from July 1, 2001 to June 30, 2002.

“Hospitals felt the full brunt of the plunge in the financial markets in FY02,” stated Marc P. Volavka, PHC4’s Executive Director. “This precipitous decline in income was driven largely by losses in investments and in the value of securities held by hospitals.”

Although non-operating income fell, the statewide average operating margin remained relatively constant in FY02 at 2.05%; hospitals realized about two cents of income for every dollar they received in operating revenue. However, because of the decline in non-operating income, the statewide average total margin or “net income” declined more than a full point falling from 3.29% in FY01 to 2.26% in FY02.

While more hospitals posted losses for FY02, the percentage of hospitals that sustained average losses over the past three years remained relatively constant; 35% of GAC hospitals had negative 3-year average total margins at the end of FY02, compared to 37% for the 3-year period ending in FY01.

Uncompensated care, a combination of bad debt and charity care, rose from $867 million in FY01 to $979 million during FY02 - an increase of 12.9%. However, patient revenue also grew by nearly 8%, so uncompensated care as a percentage of net patient revenue experienced a more modest increase, going from 4.6% in FY01 to 4.8% in FY02.

“The difficult times created by the downturn in the overall economy are clearly being felt within our hospital community,” stated Mr. Volavka. “As I’ve said before, one year does not a trend make, but these are warning signals that could have significant consequences for the future cost and quality of the health care Pennsylvania citizens receive.”

The Pennsylvania Health Care Cost Containment Council is an independent state agency charged with addressing the cost and quality of health care in Pennsylvania. The full Hospital Financial Analysis, containing financial measures specific to all general acute care hospitals in Pennsylvania, will be released in late April. Copies of this preview will be available on February 14th on the Council’s website at or by calling PHC4 at (717) 232-6787.