Geisinger Wyoming Valley had the highest operating margin — the difference of income over costs — among Luzerne County’s three General Acute Care (GAC) hospitals, according to a new report.
The annual report from the Pennsylvania Health Care Cost Containment Council analyzed data for GAC hospitals statewide to gauge their financial health, looking at data for the fiscal year 2017, which for most hospitals began July 1, 2016 and ended June 30, 2017.
Wilkes-Barre General, owned by for-profit Community Health Systems, ran a slightly negative margin.
Understanding the metrics
The reports always focus on two measures that essentially compare costs to income: Operating margin and total margin. The former is the percent of revenue remaining after all operating costs are paid to cover things like patient care, medical education, cafeteria services and parking. The latter looks at all income and expenses, including operating costs and other sources such as contributions or investment income. In many cases, there is little if any difference.
“Hospitals need positive income levels (total margin) to operate effectively,” the report notes. “Those that have a negative total margin, or deficit, are not receiving sufficient revenue to pay all of their expenses.”
The report lists data for Luzerne County’s three GAC hospitals, Geisinger Wyoming Valley, Lehigh Valley Hazleton and Wilkes-Barre General. The first two are run as non-profits, the last is run by for-profit Commonwealth Health Systems. The report also breaks hospitals into nine regions, with nine northeast Pennsylvania counties in Region 6, including Luzerne, Lackawanna and Wyoming counties.
Statewide, 169 hospitals collectively posted an operating margin of 5.15 percent and a total margin of 6.62 percent. Region 6 margins were, respectively, 4.12 percent (below the state rate) and 7 percent (above). The highest margins were posted by region 4 (10.31 percent and 12.34 percent), 10 counties in north-central Pennsylvania.
In Luzerne County, Geisinger Wyoming Valley had an operating margin of 10.79 percent and a total margin of 12.35 percent, both well above the state rate. Lehigh Valley Hazleton’s margins were 2.94 percent and 10.97 percent. Wilkes-Barre General had the same operating and total margins: -0.66 percent.
In Lackawanna County, Geisinger Community did not fare nearly as well, posting an operating margin of 0.22 percent and total margin of 1.5 percent, well below the state rates. Regional Scranton, also owned by Commonwealth Health, had margins higher than Geisinger Community but still below state rates: 3.89 percent and 2.27 percent.
Geisinger Public Affairs Vice President David Jolley said via email that in 2017 the Wyoming Valley facility “continued to make large expenditures related to strategic growth initiatives,” and provided Geisinger the ability to “spend $17 million on state-of-the-art” upgrades. he also noted Geisinger Wyoming Valley provided $52 million for community benefit without compensation or with compensation below cost, including charity work, health education and outreach.
Wilkes-Barre General Communications Director Renita Fennick noted the council breaks down operating costs “into several reporting groups. When reviewed in aggregate, Wilkes-Barre General Hospital has a positive operating margin.”
The report singled out the state’s 39 for-profit GAC hospitals, including 18 owned by Tennessee-based Community Health Systems. It noted that non-profit hospitals “retain all income” within the organization and use it primarily for capital improvements, debt reduction and a reserve to offset possible future shortfalls. By comparison, for-profit hospitals may distribute part of their income to shareholders.
For-profit hospitals are also subject to income tax, but the report notes the council considers income taxes as “non-operating expenses” in order to make operating margins comparable with non-profits. Still, the report noted, how a for-profit hospital and its parent company (i.e. Wilkes-Barre General and Community Health) handle income tax payments can impact operating margins.
Reach Mark Guydish at 570-991-6112 or on Twitter @TLMarkGuydish