SHARON Report notes a 3-year loss for hospital

Sharon Regional had hefty cost increases in employee hospitalization benefits.
By PETER H. MILLIKEN
VINDICATOR STAFF WRITER
SHARON, Pa. -- Three local hospitals made money and two lost money in the fiscal year that ended last June 30, but Sharon Regional Health System was the only one showing a three-year money-losing trend.
The three hospitals that made money last fiscal year and their total margins were: Jameson Memorial in New Castle, 4.21 percent; United Community in Grove City, 6.5 percent, and UPMC Horizon, which has Greenville and Farrell campuses, 6.02 percent.
Last year's money losers were Sharon Regional, -2.07 percent, and Ellwood City Hospital, -5.06 percent, says a statewide hospital financial report issued recently by the Pennsylvania Health Care Cost Containment Council.
The Harrisburg-based council is an independent state agency that collects and publishes health-care cost and quality information.
Three-year average
The agency's report identifies Sharon Regional as a hospital where the three-year average total margin became negative during fiscal year 2002, which ended last June 30. For the past three years, the hospital shows a slight (-.39 percent) negative total margin.
The agency explained that, while the Health System's operating margin improved from -3.45 percent in fiscal 2001 to -1.09 percent in fiscal 2002, some $1.1 million in investment losses kept the total margin from making a similar improvement.
The agency does not publish the total revenue and total expense dollar amounts from which total margins are calculated.
Cost increases
During fiscal 2002, Sharon Regional experienced cost increases of more than $2 million for employee hospitalization and pensions combined, $1.8 million for malpractice insurance, $800,000 for pharmaceuticals and an additional $1.2 million for cancer drugs, while incurring the expense of caring for an increasing number of patients, said Ed Newmeyer, the hospital's director of marketing and community relations.
Sharon Regional showed the second highest three-year gain in net patient revenue (11.21 percent) and the highest three-year gain in total operating expenses (14.33 percent) of 24 hospitals in the northwestern Pennsylvania region.
The increase in net patient revenue is because Sharon Regional offers advanced services, such as open-heart surgery, angioplasty and cancer services, Newmeyer said.
"While Sharon Regional has seen an increase in these patients utilizing the health system, the complexity of their care results in significantly higher costs," he added.
He also said Medicare payments to Mercer County hospitals, including Sharon Regional, are more than 7 percent lower than those in surrounding counties.
"During the current fiscal year, Sharon Regional has developed and implemented a number of cost-reduction efforts to control its expense levels and bring them into proportion with its revenues," Newmeyer said.
Problems elsewhere
The problems at Sharon Regional and Ellwood City are mirrored across the state, the agency said, noting that 41 percent of the state's general hospitals lost money last fiscal year.
The statewide average total margin declined more than a full percentage point, from 3.29 percent in fiscal 2001 to 2.26 percent in fiscal 2002, primarily because of an 82-percent decline in nonoperating income, HCCCC reported.
Most hospitals rely on nonoperating income, such as investments, trust income and contributions as an essential source of funding, said Marc P. Volavka, the council's executive director.
With the economic downturn, hospitals suffered a significant decline in nonoperating income, which greatly affected their overall bottom lines, the council said.
Hospital expenses have increased recently because of rising costs of staffing, malpractice premiums, drugs and medical equipment, hospital industry statements say.
No financial report was submitted to the council by St. Francis Hospital of New Castle, which closed and merged into Jameson as Jameson acquired it Nov. 1, 2002.
Hospitals in rural and suburban regions generally had lower total margins than those in Philadelphia and Pittsburgh, the report said.