West Penn Allegheny Health System posts $2.1 million in earnings for quarter

Tom Fontaine
| Saturday, Oct. 31, 2009

West Penn Allegheny Health System reported Friday that it turned a $2.1 million net profit in the last quarter of the fiscal year ended June 30 — a gain that CEO Christopher T. Olivia said shows the region's second-largest hospital network is "moving forward at a steady pace."

"We still have much work to do," Olivia said in a statement. "However, our results show that we are headed in the right direction."

The fourth-quarter results are a marked improvement over the same period a year ago, when West Penn Allegheny posted a net loss of $69.8 million.

Despite the quarterly profit, West Penn Allegheny posted a net loss of $25.2 million for the fiscal year. But that, too, was an improvement over last year, when the hospital network reported a net loss of $57.8 million.

Even with the fourth-quarter net profit and reduced net losses year to year, West Penn Allegheny's operations are failing to make money from direct patient care. The six-hospital system is the region's second largest, behind health giant University of Pittsburgh Medical Center.

West Penn Allegheny posted operating losses of $3.8 million in the fourth quarter and $38.5 million for the fiscal year.

The hospital system's fourth-quarter profit resulted from investment income of nearly $5.5 million and gifts and donations totaling $483,000. Likewise, it was able to staunch the bleeding for the year with $12.1 million in investment income and $1.2 million in gifts and donations.

Jan Jennings, president and chief executive officer of consulting firm American Healthcare Solutions, agrees that West Penn Allegheny's results "reflect an improvement. ... They are really trying to do a nice job."

About the fourth-quarter improvement, however, Jennings added: "It's like you just had a glass of water, but you still have 1,000 miles to walk through the desert."

Jennings said West Penn Allegheny remains in a weak cash position — something that makes the network "totally unqualified to compete with UPMC. ... In terms of them being able to generate sufficient capital to field new technology, replace old technology and maintain their massive physical plant and equipment, they continue to fall behind. They are getting crushed by UPMC."

In a statement to investors, though, Olivia touted the changes that West Penn Allegheny is making, including filling several leadership positions and recruiting more than twice as many physicians as it lost last year. At the same time, West Penn Allegheny eliminated 185 full-time positions across its system late this summer — 1.5 percent of its 13,000-member staff — as part of an ongoing effort to reduce expenses.

During the fourth quarter, before those cuts, the hospital network cut expenses 10 percent year-to-year while increasing revenue 7 percent.

Significant restructuring has taken place throughout its system, including a plan to end baby deliveries in January at Allegheny General Hospital in the North Side. In addition to AGH, the hospital network includes West Penn Hospital in Bloomfield, West Penn-Forbes Regional Campus in Monroeville, AGH-Suburban Campus in Bellevue, Alle-Kiski Medical Center in Natrona Heights and Canonsburg Hospital.

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