Western Pennsylvania's community hospitals need rescue from financial straits
Western Pennsylvania hospitals are under increasing financial pressure and are resorting to mergers with larger health systems, cutting services and laying off workers to survive.
Lower patient volumes and higher expenses, combined with reimbursements that aren't keeping pace with inflation, are hurting the bottom lines of medical centers of all sizes across the region and country.
But smaller community hospitals are especially vulnerable to the squeeze that in recent days has led Sharon Regional Health System to agree to be bought by a large for-profit hospital company and Uniontown Hospital to ax its skilled nursing facility, psychiatric unit, rehab program and diabetes care center.
“This is happening all over the place, especially with small hospitals,” said John Bowblis, assistant professor of health economics at Miami University of Ohio. “Unless you team up with someone who is bigger, you're going to face financial pressure.”
The latest moves in Sharon and Uniontown follow layoffs in recent months by UPMC, West Penn Allegheny Health System, Washington Hospital and Excela Health; and the purchases of Altoona Regional Health System by UPMC and West Penn Allegheny by health insurer Highmark Inc.
Bowblis said fewer people are being treated in hospitals as more care shifts to outpatient centers, which cuts into a hospital's revenue. Hospitals are facing bigger expenses for technology and to hire doctors at a time when the government Medicare and Medicaid programs, and private insurers, are trying to clamp down on rising health costs.
Earlier this month, Moody's Investors Service said in a report that the Medicare program will increase hospital reimbursements next year by 0.7 percent, far below the 2.5 percent increase in hospitals' costs that Medicare predicts.
Medicaid may begin cutting reimbursements to hospitals that treat higher levels of poor people on Oct. 1. And many hospitals took a 2 percent cut in payments under the federal sequestration this year.
UPMC, for instance, last week reported operating income of $140.3 million for its fiscal year ended June 30, a drop of 60 percent from the previous year. Operating profit at the region's largest hospital network has been declining because expenses are rising faster than revenue is increasing.
On Wednesday, Sharon Regional, a 251-bed hospital in Mercer County, said it signed a letter of intent to be acquired by Community Health Systems Inc. of Franklin, Tenn. Community Health Systems owns 135 hospitals in 29 states, including 17 in central and Eastern Pennsylvania.
“Many hospitals and health care systems are aligning with partners that can support their operations with the significant resources and management expertise required to be successful in this dynamic period of change across our industry, especially as health care reform takes effect,” John Janoso Jr., Sharon Regional's CEO, said in a written statement.
Sharon Regional hasn't negotiated a price tag for the deal but expects a significant investment in the hospital after the acquisition closes later this year, spokesman Ed Newmeyer said.
The hospital has been struggling financially. In its 2012 fiscal year, Sharon Regional reported operating income of $193,000, a 78 percent decline from the year before. That led credit rating agency Fitch Ratings in November to downgrade its outlook on the hospital to negative.
Adam Kates, a Fitch health care analyst, said he hadn't seen final numbers for the hospital's most recent financial year, “but it looked like some of the pressures continued in 2013 as well.”
On Friday, Uniontown Hospital, a 224-bed medical center in Fayette County, announced it will end four medical programs by the end of the year in an effort to avoid a loss of $6 million, or 5 percent of its $120 million budget for the fiscal year that will end next June.
Hospital CEO Paul Bacharach said elimination of the services was caused by a combination of declining hospital admissions, reduced reimbursements and higher employee costs.
“This has placed a tremendous burden on hospitals throughout the region,” Bacharach said in a written statement. “The potential of a loss of this magnitude is unsustainable on a long-term basis, and that is making it imperative to adapt the hospital to meet future heatlh care needs of the community.”
Hospital spokesman Jim Proud said 70 people work in the four departments, but the hospital hopes to avoid laying people off by shifting them to other areas that have open positions.
Alex Nixon is a staff writer for Trib Total Media. He can be reached at 412-320-7928 or email@example.com.
Add Alex Nixon to your Google+ circles.
Show commenting policy
TribLive commenting policy
You are solely responsible for your comments and by using TribLive.com you agree to our Terms of Service.
We moderate comments. Our goal is to provide substantive commentary for a general readership. By screening submissions, we provide a space where readers can share intelligent and informed commentary that enhances the quality of our news and information.
While most comments will be posted if they are on-topic and not abusive, moderating decisions are subjective. We will make them as carefully and consistently as we can. Because of the volume of reader comments, we cannot review individual moderation decisions with readers.
We value thoughtful comments representing a range of views that make their point quickly and politely. We make an effort to protect discussions from repeated comments either by the same reader or different readers.
We follow the same standards for taste as the daily newspaper. A few things we won't tolerate: personal attacks, obscenity, vulgarity, profanity (including expletives and letters followed by dashes), commercial promotion, impersonations, incoherence, proselytizing and SHOUTING. Don't include URLs to Web sites.
We do not edit comments. They are either approved or deleted. We reserve the right to edit a comment that is quoted or excerpted in an article. In this case, we may fix spelling and punctuation.
We welcome strong opinions and criticism of our work, but we don't want comments to become bogged down with discussions of our policies and we will moderate accordingly.
We appreciate it when readers and people quoted in articles or blog posts point out errors of fact or emphasis and will investigate all assertions. But these suggestions should be sent via e-mail. To avoid distracting other readers, we won't publish comments that suggest a correction. Instead, corrections will be made in a blog post or in an article.
- Stock market jumps as Fed pledges patience in rate hikes
- Harmar developer sells 15 hotels in Western Pa., West Virginia
- Fed emphasizes patient approach on rate increases
- FedEx 2Q profit jumps 23%; revenue up 8% at Moon-based Ground business
- 84 Lumber vice president McCrobie says company, housing market rebounding
- FedEx to buy product-return firm Genco in e-commerce push
- EDMC accused in GI Bill scheme
- Natural gas groups says increase in Pennsylvania taxes would bring dire results for economy
- Insurers give customers extra time to pay first month’s premium for 2015 under Obamacare
- Early oil-fueled rally fizzles on Wall Street
- Repsol to buy Canada’s 5th largest oil producer, Talisman Energy