Philadelphia-area hospitals worried by financial data

Posted: March 13, 2012

South Jersey Healthcare, buoyed by solid profits last year, in December paid bonuses to 3,094 employees, ranging from $500 for full-timers to $125 for temporary workers and those paid per day, calling the $1.2 million expenditure a “long-term investment in our staff.”

But South Jersey chief executive Chet Kaletkowski, in a statement explaining the bonuses “in a world where everyone is concerned about scarce health-care dollars,” then set the stage for a financially dimmer future, warning that pressures on the health-care industry from government policy and the economy “may preclude our employees from receiving future bonuses.”

The Vineland health-care system, which announced in January that money-losing Underwood-Memorial in Woodbury would become its third hospital, had better-than-average results last year, when some hospitals already faced flat to declining patient revenue, lower admissions, and declining operating profits, according to bond-disclosure documents for periods ending Dec. 31.

An Inquirer analysis of financial data for 14 Philadelphia-area nonprofit hospitals and health systems found that five New Jersey institutions, whose fiscal years ended Dec. 31, had an aggregate 4.4 percent increase in net patient revenue and a 2.5 percent increase in inpatient admissions, excluding Kennedy Health System, whose admissions numbers included short-term observation stays.

The analysis found a 5.7 percent increase in aggregate patient revenue at nine Pennsylvania hospitals and systems, which reported results for the six months ended Dec. 31, but a 1.4 percent overall decline in admissions. The region’s top academic medical centers, the University of Pennsylvania Health System, the Jefferson Health System, and Children’s Hospital of Philadelphia, accounted for most of the revenue growth in Pennsylvania.

“There are clearly strong hospitals and health systems with a strong market presence, public image, and strong physicians associated with them. They draw a lot of business,” said Daniel M. Grauman, president and chief executive of DGA Partners, a health-care management consulting firm in Bala Cynwyd.

Doylestown Hospital and Grand View Hospital, among the larger independent hospitals in Southeastern Pennsylvania, were not included in the analysis. Their quarterly disclosures were not available in public repositories, and officials at the hospitals did not respond to requests for the financial reports. Catholic Health East was not included because the Newtown Square organization reports consolidated results for all of its 33 hospitals.

Holy Redeemer Health System in Meadowbrook had the biggest declines in revenue and admissions. Its management said in its financial statements that the organization’s 242-bed hospital accounted for $3.4 million of $4.3 million in revenue shortfall, as patient volume fell in November and December.

“In the past year, Holy Redeemer has experienced more observation days, which has impacted the number of admissions and revenue. This means that more patients are either treated and released, or observed rather than admitted,” spokeswoman Barbara L’Amoreaux said. “As with other hospitals locally and nationally, the economic downturn has also caused more people to defer their elective procedures, which also impacts admissions and revenue,” she said.

Just a few miles from Holy Redeemer, Abington Health, which operates Abington Memorial and Lansdale Hospitals, had the second-biggest decline in net patient revenue and the third-biggest decline in admissions.

Increasing observation days, which bring in two-thirds less revenue than a full admission for the same period, were also a big factor for Abington, said the system’s chief financial officer, Michael Walsh.

In the six months ended Dec. 31, observation cases at Abington, which has maintained its “A” credit rating from Standard & Poor’s, were up 55 percent over the same period a year ago. “We’re talking millions and millions of dollars,” Walsh said.

In New Jersey, Virtua’s 4.8 percent revenue gain and 4.3 percent increase in admissions topped competitors.

Bob Segin, Virtua’s chief financial officer, highlighted gains in obstetrics, orthopedics, emergency rooms, and surgery. Virtua opened an outpatient facility in Washington Township in 2010, adding new patient volume.

Then in May, Virtua opened its $463 million, 364-bed Voorhees hospital, which has 60 more beds than the facility it replaced, Segin said.

“We’re drawing patients now from the Philadelphia marketplace because of the new facility, a marketplace where we have not drawn volume before,” Segin said.

Contact Harold Brubaker at 215-854-4651 or

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