West Penn Allegheny Health System's loss in 2013 balloons to $370M
Financial losses at West Penn Allegheny Health System ballooned to more than $370 million for its 2013 fiscal year, according to an audited financial report released on Thursday.
The loss was 2 1⁄2 times larger than the system originally reported in October, because the audited report included a non-cash charge of $214.7 million related to the value of assets and several other smaller changes, said Liz Allen, interim chief financial officer.
“It hasn't deteriorated the cash reserves of the organization,” Allen said of the impairment charge. “It's an accounting transaction.”
West Penn Allegheny reported a loss of $137.6 million for the year ended June 30 when it released unaudited financial statements six months ago.
The five-hospital system was acquired by health insurer Highmark Inc. on April 30, and it's the backbone of Allegheny Health Network, a system of doctors and hospitals formed by Highmark to compete against UPMC.
Allen said accounting rules required West Penn Allegheny to revalue its assets at the time of Highmark's acquisition.
The revaluation process revealed the system had a larger deficit between its assets and liabilities at the time of the deal, in which Highmark gave the system $475 million in grants and loans and bought West Penn Allegheny's bond debt for about $664 million.
West Penn Allegheny wrote off a portion of that deficit in assets, making the impairment charge of $214.7 million, Allen said.
While the reported loss last year looks worse on paper, Allen said, the system's financial turnaround is going well.
The system reported an operating loss of $2.1 million in the October-December quarter. In the same quarter the year before, the system had an operating loss of $33.1 million. Revenue rose to $406.4 million, compared with $385.8 million the year before.
“We've made some good progress, but we have more to go,” she said. “It's well ahead of our schedule.”
Alex Nixon is a staff writer for Trib Total Media.