Phila.-area hospitals report higher profit margins

Profitability at hospitals in Philadelphia and its Pennsylvania suburbs improved slightly last year, but the revenue growth rate continued sliding, according to an annual report by the Pennsylvania Health Care Cost Containment Council to be released Thursday.

The report, which is appearing as hospital interests are lobbying hard in Harrisburg to undo funding cuts proposed by Gov. Corbett in February, showed that the overall operating profit margin at 41 area for-profit and nonprofit hospitals edged up to 4.4 percent from 4.3 percent.

Curt Schroder, regional executive for the Delaware Valley Healthcare Council, cautioned against taking much comfort from the report, which for most hospitals covers the 12 months ended June 30.

In the first six months of the current fiscal year, through December, Schroder said profit "margins, both operating and total margins, have taken a pretty steep decline." He attributed the weakening condition of hospitals to last year's state budget cuts and the erosion of Medical Assistance reimbursements.

The state data provide a rare financial glimpse at individual for-profit hospitals, such as Community Health Systems Inc., of Franklin, Tenn., which is the second-biggest for-profit hospital operator in the country and has five hospitals in Southeastern Pennsylvania.

Its hospitals range from the most profitable in the region (Pottstown Memorial) to the least (Brandywine), based on 2010 operating profit margin, a measure that focuses on core functions and excludes investment income.

Pottstown's operating margin was 22 percent in 2010, 10 times the 2.23 percent median for the region.

The other area Community Health properties are Chestnut Hill Hospital, Jennersville Regional, and Phoenixville. Of those, only Phoenixville has been consistently profitable in recent years.

Tomi J. Galin, Community Health spokeswoman, said the strong results in Pottstown and Phoenixville reflect past investments. The other hospitals are undergoing their own improvements.

For example, Galin said, Community is spending $40 million at Chestnut Hill on a new emergency department, intensive care unit, and surgery department. Jennersville in the final phase of a 20-room expansion and conversion of existing rooms to private from semiprivate. Brandywine also recently converted to all private inpatient rooms, Galin said.

Philadelphia hospitals owned by Tenet Healthcare Corp., of Dallas, also had mixed results. Hahnemann University Hospital has lost money for at least six straight years. The Center City institution had an operating loss of $29 million on $437 million in revenue in fiscal 2011.

Hahnemann chief executive officer Michael P. Halter was not available to comment, a spokeswoman said.

The other local Tenet property, St. Christopher's Hospital for Children, by contrast, has had just one annual loss in the last six years. Its revenue climbed in each of those years, reaching $296 million last year. The North Philadelphia specialty hospital had a $27 million operating profit, giving it a 9 percent margin.

In a statement, St. Christopher's CEO Carolyn Jackson attributed the gains "to our successful efforts to increase our patient volumes, achieve cost efficiency in our operations and use integrated care to better manage our resources." She also said the hospital had expanded its reach by partnering with community hospitals.

Finally, Roxborough Memorial narrowed its losses over the last five years to $504,000 from $21 million. Solis Healthcare sold it this year to Prime Healthcare Servcies for $23.5 million.

"Solis made dramatic improvements," said Joshua Nemzoff, hospitals mergers and acquisitions specialist based in New Hope. "Unfortunately, they went from losing enormous amounts of money to almost breaking even. I would imagine they simply gave up."

Contact Harold Brubaker at 215-854-4651 or hbrubaker@phillynews.com.