Financial Analysis 2004 News Release


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


Harrisburg, PA - September 2, 2005 - The number of ambulatory (outpatient) surgery centers (ASCs) licensed in Pennsylvania and the procedures performed in them continue to increase, according to a new report from the Pennsylvania Health Care Cost Containment Council (PHC4). Between June 2004 and May 2005, 13 new ASCs opened, bringing the total to 177. In Fiscal Year 2004 (FY04), the number of diagnostic and surgical procedures performed at ASCs was more than three times larger than the number reported for FY00. ASCs also remained highly profitable, with the average statewide total margin increasing 3.2 points during FY04 to 18.99%.

“While this most recent growth in new ASCs is not as brisk as the prior 12-month period when 38 new facilities opened, it still reflects the ongoing outpatient surgery trend,” noted Marc P. Volvaka, Executive Director of PHC4. “Between FY00 and FY04, there was a 426,000-procedure increase (27%) in the total number of outpatient diagnostic and surgical procedures performed statewide, and over two-thirds (68%) of this growth occurred at ASCs.”

In FY04 alone, over one-fifth (21%) of all outpatient diagnostic and surgical procedures performed in Pennsylvania were performed at freestanding ASCs. There was also a 12.9% increase in the number of patient visits reported by ASCs.

In addition to ASCs, PHC4’s Financial Analysis 2004, Volume Two reports on the financial health of other non-General Acute Care facilities, including long-term acute, rehabilitation, psychiatric, and specialty hospitals.

Concurrent with the transition to the new Medicare prospective payment system (PPS), long-term acute care (LTAC) hospitals in Pennsylvania realized a positive statewide average operating and total margin in FY04 for the first time. Not only did this sector show positive statewide average margins, but the average operating margin grew over six points to 5.79% in FY04 from a small operating loss of –0.25% in FY03.

The LTAC hospitals reported a 20.6% or $4,899 increase in the average revenue per discharge for Medicare indemnity patients during FY04. Almost two-thirds (64%) of all LTAC patient revenue came from the Medicare indemnity program.

LTAC hospitals provide specialized acute care to medically complex patients who no longer require intensive care provided by a General Acute Care hospital, but are not ready for rehabilitation, a nursing facility or home health care. As the number of LTAC facilities continues to grow, the number of patient days of (non-psychiatric) LTAC care has grown 2.4 times (235%) in the four-year period between FY00 and FY04.

After staging an unprecedented growth in net income during FY03, the statewide average operating margin for rehabilitation hospitals fell 3.7 points during FY04 to 11.63%. This decline was the result of a 2.0% decline in operating revenue and a 2.2% increase in operating expenses. The growth in FY03 was driven primarily by an increase in statewide net patient revenue – largely the result of a $53 million increase in Medicare indemnity revenue under the new Medicare Prospective Payment System (PPS).

Psychiatric hospitals continued to struggle in FY04, posting a negative statewide average operating margin for the tenth consecutive year. In FY04, the average operating margin was –0.89%. However, the financial performance of the 17 psychiatric hospitals varied widely, with operating margins ranging from –29.01% to 27.16%.

The Pennsylvania Health Care Cost Containment Council is an independent state agency charged with collecting, analyzing and reporting information that can be used to improve the quality and restrain the cost of health care in Pennsylvania. Copies of Financial Analysis 2004, Volume Two are free and available on the Council’s website at or by calling PHC4 at 717-232-6787.