Profits up, along with unpaid care, at hospitals

Pennsylvania's hospitals rebounded financially last year as the recession lifted, but they also saw a continued increase in patients who couldn't pay their bills.

In its annual report on the financial health of hospitals, the Pennsylvania Health Care Cost Containment Council (PHC4) said average margins were up for hospitals, which saw an increase in patient revenue and investment income. Nonetheless, nearly a quarter of hospitals operated in the red.

"Overall, the financial health of Pennsylvania hospitals improved, primarily because of gains in the economy and the stock market," said Joe Martin, executive director of the cost containment council. "However, the cost to hospitals for providing uncompensated care continues to increase."

The statewide average operating margin increased from 3.53 percent in fiscal 2009 to 4.36 percent in fiscal 2010.

Uncompensated care - a combination of charity care and unpaid bills - rose to $891 million in fiscal 2010 from $825 million in 2009, an increase of 8 percent. It accounted for 2.59 percent of net patient revenue, the highest level since 2001, when it was 2.46 percent.

Stephanie Suran, communications manager for the council, blamed the increase in unpaid bills on the recession and the resulting higher numbers of people who lost health insurance.

Ken Braithwaite, regional executive for the Delaware Valley Healthcare Council, said the amount of uncompensated care in the Philadelphia region rose by 8 percent from $290 million in 2009 to $312 million last year. Hospitals generally must provide care to stabilize patients whether people can pay for it or not.

Braithwaite and officials at his parent organization, the Hospital and Healthsystem Association of Pennsylvania, said $333.3 million in proposed cuts to Medicaid now threaten the fragile improvements in hospitals. The number of people covered by Medicaid - state and federal health insurance for the poor - is growing, while hospitals say the program's payments already cover less than the cost of care.

Braithwaite said 18 percent of people in the Philadelphia area are now eligible for Medicaid. The number of suburban residents receiving Medicaid increased by 29 percent from December 2007 to December 2010, from 192,307 to 247,307, he said.

Hospitals generally lag behind the economy by about a year during recoveries, so Braithwaite expects the positive trend for hospitals to continue as long as state cuts can be avoided.