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Local hospitals’ operating margins below state level, report says

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Acute care hospitals statewide experienced a collective 4.76% operating margin in fiscal year 2018, according to a report released Tuesday by an independent state agency.

All four hospitals in Washington and Greene counties were below that figure, and two of them posted negative operating margins, the Pennsylvania Health Care Cost Containment Council reported.

A negative operating margin means that expenses tied to running the hospital are higher than the revenue needed to pay those expenses. In some cases, hospitals can offset the deficits with gains from an investment portfolio, foundation funding or donations.

Washington and Greene are included in Region 1 of the study, made up of the eight southwestern-most counties. Allegheny, Armstrong, Beaver, Butler, Fayette and Westmoreland are the others.

There are 29 acute care hospitals in Region 1, which collectively had an operating margin of 4.62% – also below the Pennsylvania average. Four of the nine regions in the commonwealth were above the state average in fiscal 2018, all in the eastern two-thirds.

The statewide operating margin, however, did drop 5.15% from fiscal 2017, with operating income decreasing from $2.4 billion to $2.3 billion.

Washington Hospital, flagship of Washington Health System, posted the highest operating margin – 3.35% – among facilities in Washington and Greene counties in fiscal 2018. Monongahela Valley, in Carroll Township, also had a positive figure, 0.40%.

Canonsburg Hospital and WHS-Greene had negative operating margins, according to PHC4. Canonsburg, located in North Strabane Township and part of the Allegheny Health Network, had a negative 4.88% margin. WHS-Greene was at minus 4.06%.

Gary Weinstein, president and chief executive officer of WHS, doesn’t put much stock in the numbers associated with Washington Hospital and WHS-Greene because they pertain to individual facilities and not to health systems with multiple operations.

“This offers a glimpse at part of our system, but it would be more instructive to have a more comprehensive picture,” he said. “They’re not looking at, for example, the physicians organization with our system or the Greenbriar Treatment organization. This doesn’t tell the whole story of our system.”

Weinstein said Washington Hospital “consistently runs positive operating margins and this year is no different. But the health-care environment is challenging these days.” He said WHS started a long-term drug treatment program at the Greene facility last year, and “that does not show up in the operating margin, but it is an important service.”

As for WHS-Greene’s negative operating margin, Weinstein said it’s “a much smaller facility” and noted that a lot of small, rural hospitals statewide showed negative margins. WHS acquired Greene, then known as Southwest Regional Medical Center, in 2015.

“We’ve been able to stabilize finances at that hospital and provide great service to the people of Greene County, and we hope to continue to do that.”

Allegheny Health Network did not immediately respond to a request for comment regarding Canonsburg Hospital.

Some patients residing in Washington and Greene go to hospitals outside those counties, and among the most common ones, St. Clair in Mt. Lebanon had the highest operating margin in fiscal 2018 – 11.81%. Jefferson, in Jefferson Hills, was at 8.20%. Uniontown Hospital was a negative 4.06%.

None of those figures, though, compares with the negative 44.97% operating margin at Ellwood City Hospital in Lawrence County.

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