Independence Health sees about $23 million in losses over 3-month period

Independence Health System operated at a deficit of almost $23 million between the beginning of July and the end of September this year, according to recently released reports.

The shortfall is an extension of the downsliding pattern that the combined health system — made up of subsidiaries Excela Health and Butler Health System — has seen since it formed in January.

For Excela, it’s about $3.6 million less than the net loss during the same period last year, when the system saw a net loss of about $14.5 million. But Excela’s operating losses for the period this year were much higher, at $9.7 million, compared to last year’s $2.1 million.

At Butler Health System, this year’s operating losses are greater than last year’s. The Independence subsidiary saw about $13 million in operating losses for the 3-month period in 2023, compared to $1 million last year. Total net losses were much greater for Butler Health this year, too. The system lost about $1 million during last year’s 3-month period, compared to $12 million over the same time in 2023.

The system has pointed to pandemic aftershocks, inflation, low reimbursements from Medicaid and Medicare, and an aging regional population as some of its challenges as it hemorrhages cash.

According to recent reports, Butler Health lost $43.3 million and the Excela lost $36.2 million, for a total of more than $79 million in losses for the fiscal year ending June 30.

Excela and Butler file their disclosure reports separately despite being subsidiaries of Independence.

In this most recent financial report, Excela Health admitted the system is facing “hurdles to restore better margins.” It touted its “solid balance sheet strength and limited debt structure risks,” and described the current moment as a “period of operational stress.”

“Excela Health’s growth strategies as well as the merger with Butler Health System will help secure its leading market position, which will remain a credit strength, though competition will continue to heighten,” the report said.

In a bondholder meeting in early November, Independence leadership detailed a recovery plan the system put together alongside consultant FTI Consulting.

According to the plan, the system expects to stanch some of its financial bleeding in fiscal year 2024, and expects to see losses of about $23 million during that period — which is close to the amount the system reported losing in the most recent 3-month span.

Independence spokesperson Tom Chakurda told TribLive that the recent financial reports “reflect what was portrayed and discussed on our recent bond call.” He declined further comment.

Independence has cut 226 positions this year, and according to the bondholder presentation, workforce management initiatives are expected to save the system $10.2 million next fiscal year.

The system has reported struggling with its payer mix, or insurance sources for payments. Because the population of Western Pennsylvania is aging and fewer young people are moving in, CFO Tom Albanesi said more patients are relying on Medicare and Medicaid, which do not reimburse health systems as much as commercial insurance. The plan expects negotiations with payers to show results in early 2024.

Other money-saving initiatives are in place, including moving from more brand-name to generic drugs and reevaluating supply chain contracts and vendors.

About 60% of Excela Health and Butler Memorial Hospital’s revenues come from Medicare. At Clarion Hospital, the mark is about 55%.

Independence Health System’s two hospital presidents, Brian Fritz and Karen Allen, confirmed in August that all five of the system’s hospitals — Westmoreland, Frick, Latrobe, Butler Memorial and Clarion — would be part of the system’s future despite the ongoing financial challenges.

The health system has more than 1,000 physicians and advanced practice providers and employs 7,300 people.