Split of Jefferson Health System changes health-care landscape

Posted: March 22, 2014

The planned financial split this summer of the Jefferson Health System will result in two organizations close to the same size in terms of revenues, but not in term of profits.

Thomas Jefferson University Hospitals Inc. had $1.55 billion in revenues in the year ended June 30, compared with $1.43 billion at Main Line Health Inc., according to data released this week.

But Main Line, which owns four acute-care hospitals in Philadelphia's relatively affluent western suburbs, had $157 million in operating profit in fiscal 2013, twice as much as the $74 million reported by Thomas Jefferson.

Behind the University of Pennsylvania Health System, Main Line had the second-lowest level of charity care, which is granted based on patient financial need, in Southeastern Pennsylvania relative to patient revenues.

Although Main Line and Thomas Jefferson never became tightly integrated after forming Jefferson Health System in 1995, the end of JHS will change the financial landscape of health care in the region.

The University of Pennsylvania Health System has long been the region's largest system in term of revenue, but now, with $3.5 billion in annual revenues last year, it towers above all other systems.

JHS, including Main Line, Thomas Jefferson, Magee Rehabilitation Hospital, and other operations, had $3.05 billion in revenue last year. That was $500 million less than Penn, which had 647 fewer staffed beds and fewer admissions than JHS, but more patients who needed expensive forms of care.

The JHS announcement Monday prompted a bond analyst on an unrelated Tuesday conference call with Temple University Health System executives to ask about the impact of Thomas Jefferson and Main Line splitting.

"I think it just further causes a little bit more division within the market. We've got a marketplace that is highly fractionated, with no one real dominant player," said Larry Kaiser, chief executive of Temple's health system.

University of Pennsylvania health-care expert Mark V. Pauly on Thursday called the JHS split anomalous, given the industry consolidation expected by many experts.

If consolidation happens in the region, the separation of Thomas Jefferson and Main Line opens up more possibilities in a game of musical chairs. "I'm not sure who will be left standing when the music stops," Pauly said.

Stephen K. Klasko, president and chief executive of both Thomas Jefferson University and the parent Thomas Jefferson University Hospitals Inc., is not a fan of consolidation for the sake of consolidation.

"My guess is, if you look five years from now," Klasko said Monday, "Jefferson will not just be a two or three hospital system in central Philadelphia and a university, but any consolidation we do or any new affiliation we do will be based on strategic alignment and providing better value to the community."


hbrubaker@phillynews.com

215-854-4651

@InqBrubaker

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