Profit margins for region's hospitals fell last year

The Hospital of the University of Pennsylvania, unlike most others, had a strong financial performance last year.

Profit margins turned down last year at hospitals in Southeastern Pennsylvania after two years of improvement following the recession, data released Wednesday showed.

The average operating margin at 19 hospitals in Philadelphia fell to 4.59 percent in the 12 months ended last June 30 from 4.68 percent the year before, the Pennsylvania Health Care Cost Containment Council's report said.

Strong performances at the Hospital of the University of Pennsylvania and Children's Hospital of Philadelphia - the two largest hospitals in the region by total revenue - buoyed overall results in the city.

At 24 suburban hospitals, the decline was more dramatic. Operating profit, a core measure of financial performance that does not include investment income and certain other items, fell to 4.36 percent from 5.95 percent.

Overall, 43 hospitals in Philadelphia and the four suburban counties had $15.32 billion in revenue in fiscal 2013 and operating income of $721.8 million, resulting in an operating margin of 4.7 percent.

However, 16 of the 43 hospitals had operating losses in fiscal 2013, up from 10 of 43 the year before, as government reimbursement cuts, increases in low-paying observation stays, and other forces squeezed results.

Only 11 tax-exempt hospitals reported improved operating margins.

The report provides a rare glimpse at the results of individual for-profit hospitals. But they should be read with caution.

Peter Adamo, chief executive officer of two for-profit hospitals owned by Prime Healthcare Inc., Lower Bucks and Roxborough, said the data for his hospitals showing substantial losses were not reliable.

"We're part of a 25-hospital system," he said, "and do all our accounting through the parent company."

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