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Hospital profit margins decline in Pittsburgh area

| Wednesday, May 15, 2013, 12:06 a.m.

Profit margins at hospitals across the Pittsburgh region are falling as they face cuts in government reimbursements and declining patient volume.

The average margin on hospital operations last year was 5 percent, down from 6.1 percent the year before, according to a report released on Wed­nesday by the Pennsylvania Health Care Cost Containment Council.

The council, an independent state agency in Harrisburg, collects annual financial data on the state's hospitals, including the 27 not-for-profit medical centers in the Pittsburgh area.

“While a number of hospitals, particularly larger facilities, experienced relatively healthy margins in fiscal year 2012, there are trouble spots among many of the small to mid-size hospitals in PA,” Joe Martin, the council's executive director, said in a written statement.

Four hospitals in the region posted negative operating margins for the fiscal year that ended June 30, 2012, the council report shows. That's improved from the previous year, when six area hospitals had negative margins.

Ohio Valley General, a 138-bed hospital in McKees Rocks, posted a negative margin of 5.8 percent. Officials could not be reached for comment.

Heritage Valley Health System's Beaver hospital had a negative margin of 1.8 percent. Heritage Valley spokesman Dan Murphy said the system as a whole, which includes a hospital in Sewickley and other operations, recorded a 0.6 percent operating margin last year.

The Sewickley hospital had a profit margin of 4.3 percent, according to the council's report.

Two of West Penn Allegheny Health System's five hospitals — Canonsburg General and West Penn in Bloomfield — showed the two worst negative margins last year, 7.9 percent and 17.6 percent, respectively.

West Penn Allegheny spokesman Dan Laurent said the large loss at West Penn, a shortfall of $40 million between revenue and expenses, was caused by a shuttering of most of the hospital in the previous year. It was reopened in early 2012 and has been adding services, Laurent said.

“We experienced some expected operational losses during the initial start-up period as the community, EMS (emergency medical services) and referring doctors became reacquainted with the hospital,” he said.

Since then, West Penn has added specialists and opened a cardiovascular surgery area, which are bringing in more patients.

“At Canonsburg, we are also exploring opportunities to enhance and grow the services we offer at the hospital,” he said.

Alex Nixon is a staff writer for Trib Total Media. He can be reached at 412-320-7928 or anixon@tribweb.com.

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