Hospital Profitability in Pennsylvania: A 2014-2015 Update (1 of 2)

Is your hospital profitability suffering?  Is it being squeezed by a competitor? Or, is your hospital the one doing the squeezing?  Is it even making money?

As physicians we don’t often ask ourselves about the bigger organizational strategy.  However, it is hard to ignore the reality that hospital policies affecting us are often informed by numbers so hard to understand that sometimes we just pretend that logic doesn’t exist.

Maybe it’s time to do something about that.

The commonwealth of Pennsylvania Health Care Cost Containment Council presents financial reports from all hospitals in the state.  Several years ago I wrote a blog post to get a general sense how Pennsylvania hospitals perform financially using 2010 data.

In this post I present an updated analysis using statistical methods and compare it against 2010. All the data used for the calculation is publicly available here.

Hospital Profitability Data from Pennsylvania

Is your hospital being financially squeezed by a competitor?

Descriptive statistics for hospital profitability in Pennsylvania (in parentheses are 2010 figures using same descriptive methodology):

• Number of Hospitals Included: 171 (compared to 161 in 2010)
• Average Operating Revenue: $233 million ($222 million)
• Average Operating Expense: $222 million ($212 million)
• Average Operating Income: $10.4 million ($10 million)
• Average Operating Profit Margin: -0.25% (+2.5%)
• Median Operating Profit Margin: 2.1% (1.8%)

The hospital with the largest operating revenue remains the same.  Hospital of University of Pennsylvania takes the lead with reported operating revenue of $2.4 billion ($1.9 billion in 2010), operating expenses of $2.1 billion ($1.75 billion in 2010), making an operating profit margin of 12.5% (9.7% in 2010).

The most profitable (highest operating profit margin) hospital in Pennsylvania has changed.  In 2014, the most profitable hospital was Rothman Orthopedic Specialty hospital, with revenue of  $43 million, operating expense of $30 million, comprising an operating margin of 30.1%.

In 2010, the most profitable was Easton Hospital (Easton, PA), with revenue of $213 million, operating expense of $159 million, comprising an operating margin of 25.3%.

Hospitals with the highest operating incomes have somewhat changed.  See my prior analysis for the FY 2010 data.  In FY 2014, the ranking is as follows:

1. Hospital University PA ($297.1 million)
2. Children’s Hosp Phila ($214.7 million)
3. Milton S Hershey ($103.8 million)
4. Pinnacle Health ($81.2 million)
5. Lancaster General ($74.1 million)
6. York ($73.8 million)
7. UPMC Presby Shadyside ($69.9 million)
8. St Mary MC ($54.3 million)
9. Main Line Paoli ($53.4 million)
10. St Luke’s Bethlehem ($47.2 million)

Finally, I created two graphs, one for operating margin (i.e. hospital profitability, in percents), and one in operating income (in raw dollars) and compared each to 2010.

Hospital Profitability in Pennsylvania, Operating Margin FY 2014

For comparison, here’s the analysis I performed years ago using 2010 data:

Hospital Profitability in Pennsylvania, Operating Margin FY 2010

The data using operating income is as follows:

Hospital Operating Income in Pennsylvania, FY 2014

Again, for comparison, FY 2010 data is as follows:

Hospital Operating Income in Pennsylvania, FY 2010

Discussion

Continue to Part 2

Howard Chen

Vice Chair for Artificial Intelligence at Cleveland Clinic Diagnostics Institute

Howard is passionate about making diagnostic tests more accurate, expedient, and affordable through disciplined implementation of advanced technology. He previously served as Chief Informatics Officer for Imaging, where he led teams deploying and unifying radiology applications and AI in a multi-state, multi-hospital environment. Blog opinions are his own and in no way reflect those of the employer.