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West Penn Allegheny Health System records profit

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By Rick Stouffer
Tuesday, Dec. 1, 2009

A sharp increase in investment income was key to West Penn Allegheny Health System on Monday reporting its second consecutive quarterly profit.

The region's second largest health care system reported a net profit of $4.3 million for the initial three-month period of fiscal 2010, which ended Sept. 30, compared to a $16 million loss for the three months ended Sept. 30, 2008.

The results followed the $2.1 million net profit reported by West Penn Allegheny for the final three months of fiscal 2009, which ended June 30.

"We realize that we still have much work to do to improve our operations, but we certainly are on the right path," CEO Christopher T. Olivia said, in a statement.

While recording an overall profit, West Penn Allegheny continued to lose money from patient operations. The health care system lost more than $4.1 million during the first quarter, but that was down substantially from an operating loss of $17.3 million in the year-ago period.

That operating loss was offset by an increase in investment income to $8.4 million, during the three-month period, compared to $1.0 million in the same period a year earlier. The jump was a result of improvement in the stock market.

Patient service revenue during the quarter increased by 4.5 percent, to $403.7 million from $386.3 million. The patient revenue increase was primarily due to growth in outpatient volume and rate increases from government and third-party reimbursements.

Total expenses for the quarter increased 1 percent, to $423.2 million, from $418.8 million one year ago. The expense category registering the largest year-over-year percentage increase was the health system's provision for bad debts, which increased 11.5 percent to $14.7 million from $13.2 million.

Total revenue for the most recent quarter was $419.1 million, up 4.4 percent from one year ago, and recorded despite a decline in inpatient volume, West Penn Allegheny said.

With the loss in inpatient volume, West Penn Allegheny has responded by implementing additional expense reduction actions, and is considering making several physician practice acquisitions to increase patient volumes.

The health system during this fiscal year intends to reduce salaries, wages and benefits as a percentage of total revenue through a reduction in employees by about 250, it said.

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