Some hospital pension funds in critical condition

Posted: April 26, 2013

Pension funds are probably not among the top five worries for most nonprofit hospital executives, but a Standard & Poor's report this week showed a negative trend that could be trouble for financially struggling hospitals.

The pension funds in the S&P study had, on average, 69.4 percent of the money they needed to meet their future pension obligations in fiscal 2012, down from 72.6 percent the year before and down from 90 percent in 2007.

Most of last year's drop was caused by a decline in the rate used to adjust future obligations for the expected growth in investment values, the S&P said.

Given the assumed rates of return for pension calculations, pension costs "will likely be a drag on the sector in the next several years," S&P analysts Liz Sweeney and Kenneth T. Gacka wrote in the report published Monday.

The report looked at 25 funds in more detail, including Children's Hospital of Philadelphia, Crozer-Keystone Health System, Jefferson Health System and the University of Pennsylvania Health System.

Of those, Crozer, which is the dominant health care provider in Delaware County, had the lowest funded status as of June 30, 2012, at 51.7 percent. That funding level, the second-lowest among the 25 health systems, fell from 64 percent in fiscal 2011.

That significant drop occurred despite Crozer's $64.2 million in pension contributions in fiscal years 2011 and 2012. In those two years Crozer generated only $45 million in cash from operations.

The University of Pennsylvania Health System's funded status, at 59.9 percent, was the next lowest among area systems. Penn contributed about twice as much as Crozer to its fund over the two years, but those contributions of $125.9 million amounted to just 17 percent of its operating cash flow.

A bright spot for the region was Grand View Hospital in Sellersville.

Grand View, one of just a handful of independent hospitals remaining in the Philadelphia region, in 2011 had the second-highest funding ratio nationally among 328 hospitals and health systems in the S&P study.

That ratio was 122 percent, which means Grandview had 22 percent more than it needed to meet its future pension obligation. The median nationally was 73 percent.

Contact Harold Brubaker at 215-854-4651 or

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