Here’s a look at the financial health of Lancaster County’s hospitals: state report

• By Lucy Albright/LNP | LancasterOnline

Penn State Health Lancaster Medical Center’s operating deficit has improved, but is still among the largest in the state — while other Lancaster County hospitals have posted some of Pennsylvania’s best numbers last fiscal year, according to an independent report from the Pennsylvania Health Care Cost Containment Council, which can be found here.

Penn State Health Lancaster Medical Center

Lancaster County’s newest hospital was still operating at a loss during the 2023-2024 fiscal year. A 142-bed hospital in East Hempfield Township, Penn State Health Lancaster Medical Center began seeing patients in early October 2022.

The medical center’s fiscal year 2023-2024 operating deficit of $42,044,000, while large, is significantly less than in fiscal year 2022-2023, when it was $72,352,000. The facility was open for only part of the 2022-2023 fiscal year. Still, that leaves Lancaster Medical Center’s operating deficit among the largest in the state, surpassed by only four of the general acute care hospitals measured in the latest statewide report.

The hospital’s operating margin, a measure that compares the operating income to the total operating revenue, was -25.71% in fiscal year 2023-2024, up from -104.38% the fiscal year before.

An operating deficit is “not unusual” for new hospitals, which can take years to achieve positive operating margins, spokesperson Scott Gilbert told LNP | LancasterOnline last year. There are two reasons for that: the capital and operating investments required to open a hospital, he said, and the process a new hospital must go through in order to be paid for all of the care it provides.

Lancaster Medical Center made improvements on another metric: net patient revenue. From fiscal years 2022-2023 to 2023-2024, that number more than doubled, from $68,441,000 to $161,173,000 — a much bigger increase than Lancaster County’s three other hospitals saw during that period.

As for uncompensated care, the percentage of the care provided by the hospital that isn’t paid for — which includes charity care and debts that can’t be collected — Lancaster Medical Center was the lowest among Lancaster County’s general acute care hospitals for fiscal year 2023-2024. Only 0.93% percent of the hospital’s care was uncompensated, down from 2.33% in the 2022-2023 fiscal year.

The Medicare share of the hospital’s net patient revenue was 32.13% in fiscal year 2023-2024, up from 27.79% in 2022-2023.

Lancaster Medical Center has shown “remarkable progress for a new hospital,” Gilbert said in response to recent questions from LNP | LancasterOnline, noting that it “typically takes years for new hospitals to reach full operational maturity.”

The hospital’s patient volumes and revenue have continued to grow since it opened, Gilbert said.

Gilbert said Penn State Health views these types of reports at the health system level, and he pointed to positive performance metrics at Milton S. Hershey Medical Center and Penn State Health Holy Spirit Medical Center.

Penn Medicine Lancaster General Hospital

Penn Medicine Lancaster General Hospital’s net patient revenue during the 2023-2024 fiscal year was $1,421,482,000, the 11th highest in the state and quadruple that of its runner-up in Lancaster County.

That’s no surprise — the hospital is among the state’s 10 largest based on “inpatient beds, inpatient and outpatient volume and patient revenue,” spokesperson Marcie Brody told LNP | LancasterOnline last year.

The previous fiscal year, the hospital’s net patient revenue was $1,329,597,000.

Operating income at the 525-bed Lancaster city hospital was $77,138,000, down from $113,037,000 in fiscal year 2022-2023. The operating margin in fiscal year 2023-2024 was 4.75%, down from 7.66% the previous fiscal year — that’s in contrast to the statewide average operating margin, which increased 4.54 percentage points to 6.80%.

The hospital’s average change in total operating expenses between fiscal year 2020-2021 and fiscal year 2023-2024 was 10.23%, larger than the other two Lancaster County hospitals for which this metric is available, but similar to the statewide average of 10.03%.

Uncompensated care at the hospital didn’t change much, falling from from 1.44% in fiscal year 2022-2023 to 1.16% in 2023-2024. The hospital’s Medicare share of its net patient revenue was 35.34% in fiscal year 2023-2024, up from 34.50% in fiscal year 2022-2023.

“Like many health systems across the country, Penn Medicine Lancaster General Health faced financial headwinds in the last fiscal year due to factors including inflation-driven increases in the cost of medical supplies and equipment, rising labor expenses and lower patient volumes in some areas,” Brody said recently.

Brody added that reimbursement rates have not kept up with the cost of care. More patients are shifting to government payors like Medicare, which “widens the gap between costs and reimbursement,” she said.

Efforts to address these challenges have included decreasing reliance on agency labor and “ensuring that staffing aligns with patient care needs,” Brody said.

When asked about the hospital’s decrease in operating income, Brody pointed to LG Health’s continued investments in staff, services and facilities. She noted the June 2024 completion of a multi-year expansion of the hospital’s emergency department, as well as the opening of two non-hospital locations.

As for the hospital’s three-year average increase in total operating expenses, Brody said that LG Health and health systems across the country are experiencing increased operating expenses largely driven by rising costs of labor and supplies.

UPMC Lititz

Located in Warwick Township, UPMC Lititz had the fourth largest operating margin in the state — 25.02% in fiscal year 2023-2024. In 2022-2023, its operating margin was 24.24%.

The hospital’s operating income was $32,901,000 in 2023-2024, up from $31,439,000 the previous fiscal year. Its average change in total operating expenses from fiscal year 2020-2021 to 2023-2024 was 5.22%.

UPMC Lititz also had the highest percentage of uncompensated care among the Lancaster County hospitals, at 3.67% for fiscal year 2023-2024. In fiscal year 2022-2023, that number was 4.16%.

The 148-bed hospital’s net patient revenue was $119,868,000 in fiscal year 2023-2024, up from $114,527,000 in 2022-2023. The Medicare share of its net patient revenue was 34.16% in 2023-2024 and 34.54% in 2022-2023.

“Each UPMC hospital operates as part of the UPMC network and is supported by the strength and resources of UPMC, one of (the) nation’s leading integrated health systems,” spokesperson Zachary Sweger said in response to questions about the hospital’s performance. “While PHC4’s isolated data points for FY2024 may be interesting to see for individual hospitals, it is important to note that UPMC has always reported its financial results as a system ….”

A press release from the Hospital and Healthsystem Association of Pennsylvania echoed that point. It noted that many hospitals are part of health systems, and that the hospital-level finance report does not show the full picture of strain on the hospital industry.

WellSpan Ephrata Community Hospital

WellSpan Ephrata Community Hospital had the second highest net patient revenue in the county, at $305,081,000 in fiscal year 2023-2024, up from $291,799,000 the fiscal year before.

But the 141-bed Ephrata Borough hospital’s operating income fell from $21,113,000 in fiscal year 2022-2023 to $18,065,000 in fiscal year 2023-2024. And its operating margin fell from 7% to 5.88%.

WellSpan Ephrata’s average change in total operating expenses from fiscal year 2020-2021 to fiscal year 2023-2024 was 5.38%.

The hospital’s uncompensated care was at 1.64% in fiscal year 2023-2024, up from 1.17% in fiscal year 2022-2023. The Medicare share of its net patient revenue was 28.39% in 2023-2024 — the 11th lowest in the state. In 2022-2023, it was 29.65%.

Asked about the hospital’s performance, spokesperson Ryan Coyle emphasized that WellSpan Health operates not as individual entities but as a system.

“While each hospital’s margins are dictated by complexities within that geography, WellSpan overall is well positioned to face the challenges of declining reimbursements, rising costs, workforce shortages, pharmaceutical and supply chain inflation, and the many other headwinds we face in healthcare,” Coyle said.