Pennsylvania hospital margins thin following COVID-19

Pennsylvania hospitals saw a 33% loss in operating income as a result of the COVID-19 pandemic, according to a new fiscal report by the Pennsylvania Health Care Cost Containment Council (PHC4).

In a new report documenting the margins of hospitals throughout the state, PHC4 reported a decrease in operating income from $2.8 billion in fiscal year 2019 to $1.9 billion in fiscal year 2020, a decrease of 33% statewide.

PHC4’s annual report on the financial health of Pennsylvania hospitals, titled Financial Analysis 2020, used hospital data from 164 general acute-care hospitals licensed in the Commonwealth.

The report found that the total margin realized by Pennsylvania’s hospitals decreased by 2.7 percentage points, from 6.63% in fiscal year 2019 to 3.93% in fiscal year 2020. The statewide operating margin decreased 1.89 points from 5.61% to 3.73%, according to the report.

“This significant change in operating and total margins reflects the financial impact on hospitals due to the pandemic COVID 19 crisis,” said Joe Martin, executive director for PHC4. “Many hospitals will face serious financial challenges as Pennsylvania works to mitigate the fiscal impact of the epidemic.”

The number of hospitals that posted low or negative margins is a troubling indicator for hospitals moving forward, according to Martin.

“In fiscal year 2020, 38% of Pennsylvania hospitals posted a negative operating margin, and 18% of Pennsylvania hospitals posted an operating margin between 0% and 4%,” he said. “38% of Pennsylvania hospitals posted a negative total margin and 17% of Pennsylvania hospitals posted a total margin between 0% and 4%.”