In wake of coronavirus, Excela's ink runs from black to red with nearly $36 million in losses

Editor’s note: This story has been updated to reflect the current title of Excela Health CEO John Sphon.

Until early March, the financial turnaround that Excela Health officials had been expecting for the past year was in full swing.

Just two months later, a nearly $3 million profit has turned into nearly $36 million in losses, a figure Excela officials attribute solely to the ongoing coronavirus pandemic, which limited the hospitals to providing just emergency care and treatment for covid-19 patients for about eight weeks.

“Up until the pandemic, it was a $14 million turnaround, which we were excited about. Then the pandemic hit,” said Thomas Albanesi Jr., Excela’s executive vice president and chief financial officer.

On Wednesday, Excela released a report detailing the health care system’s financial situation for the first nine months of the 2020 fiscal year, which ends June 30. Excela, which operates Frick, Latrobe and Westmoreland hospitals, went into the year with expectations to reverse its recent losses, which last year reached nearly $10 million.

The plan had been working, according to CEO John Sphon, who previously served in an interim capacity and was appointed to the job in December.

Through March, hospital admissions had increased by 2.8%, attributed primarily to gains in orthopedic, urological, vascular and general surgeries. Sphon said Excela’s focus on upgrades to its cardiac program resulted in a near-doubling of open-heart surgeries over the last year.

As a result, officials believed the bottom line would have transitioned from red to black ink, reversing a two-year trend.

“As recently as two months ago, we were on the way back,” Sphon said. “I’m comfortable we will rebound and recover, but it will take more work to do it.”

Excela is the county’s largest employer, with more than 4,700 medical and support workers.

Operating losses over the last two months attributed to the pandemic have nearly equaled those of all of the last fiscal year, more than $9 million. An additional $28.3 million was lost through investments as a result of the stock market downturn related to the pandemic.

Albanesi said some of those market losses are expected to recover by the end of the next quarter.

Excela will see a cash infusion of $10.4 million in federal funds received in April, and officials are hopeful more government money will arrive later this year.

Officials said they expect no major operational changes moving forward and say Excela is prepared should a second surge of covid-19 come later this year.

“Our administrators and staff know what to do. We’re a different organization now than we were two months ago. I think we will be more prepared if another wave hits,” Sphon said.

He suggested hospital officials will re-evaluate how the system handles coronavirus patients, who currently are treated at all three of the system’s hospitals. Officials are considering a plan that would localize all covid-19 patients to one facility.

The financial situation moving into the 2021 fiscal year remains unpredictable due in large part to how a future outbreak could impact the bottom line, officials said.

Albanesi said Excela has about $275 million in the bank, enough to allow the health system to continue operating at current levels for about 175 days, should another wave of the virus surface.

Still, even with massive losses, Excela officials said the success that came before the onset of the pandemic proves the system’s plan to improve its financial health is working.

“There is reason for optimism. We think these types of programs are needed in the future,” Sphon said.