News Release - Financial Analysis 2003 Preview


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


Harrisburg, PA - February 19, 2004 - Nearly half the state’s general acute care hospitals lost money in Fiscal Year 2003 (FY03), according to new figures released today by the Pennsylvania Health Care Cost Containment Council (PHC4). Forty eight percent had negative total margins in FY03, growing from 42% in FY02 and 34% in FY01. Total margin rose slightly over the last fiscal year.

“With continuing declines in non-operating income, it is becoming more difficult for hospitals to operate in the black,” stated Marc P. Volavka, Executive Director of PHC4. “The continuing impact of the recent economic downturn, as reflected in the steep declines in non-operating income, puts greater pressure on the patient revenue side of the equation and dramatically affects the overall bottom line.”

On a statewide basis, overall net income increased slightly from 2.19% in FY02 to 2.27% in FY03, primarily due to a small rise in income produced from operations, which includes patient care, medical education, office space, parking and cafeterias. However, non-operating income remained low at $30.5 million, as hospitals continued to experience low returns and losses in the values of their investments.

Since the total margin is still positive, the overall industry is realizing enough revenue to pay expenses, but many hospitals may find it difficult to replace obsolete equipment and finance facility improvements and equipment.

“The percentage of hospitals that sustained average losses over the last three years increased to 38%, while there was a dramatic reduction in the percentage of hospitals posting three-year average total margins in the 2% to 6% range,” noted Mr. Volavka. “There was a clear downward trend in the medium-term (3-year average) income of hospitals.”

On a statewide basis, hospitals provided $2.4 million less in uncompensated care in FY03 than in the previous year. Uncompensated care -- care that is written off as bad debt or charity care -- made up 2.07% of the statewide net patient revenue in FY03, as compared to 2.27% in FY02. In FY03, PHC4 modified the method of calculating uncompensated care in order to meet its responsibilities under Act 77 of 2001 (Tobacco Settlement Act).

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 numbers released today are aggregate statewide numbers. The full Hospital Financial Analysis, containing financial measures specific to all general acute care hospitals in Pennsylvania, will be released in late April.