Erie County hospitals struggled financially in fiscal 2023: statewide report

Rising costs and the end of special COVID-19 government reimbursement are two reasons why the hospitals posted millions of dollars in operating deficits

Erie Times-News

All four of Erie County's acute-care hospitals spent more money running their facilities in fiscal 2023 than they earned treating patients, a rare occurrence.

Rising costs and the end of special COVID-19 government reimbursement are two reasons why UPMC Hamot, Saint Vincent Hospital, Corry Memorial Hospital and Millcreek Community Hospital each posted operating deficits in fiscal 2023, meaning their operating expenses exceeded their revenue for treating patients.

"The biggest challenge was the rising cost of everything: labor, supplies, food," said Marcus Babiak, chief operating officer of LECOM Health's Millcreek Community Hospital. "We saw the increases start during the pandemic and they have continued."

More than half of Pennsylvania's general acute-care hospitals ended with an operating deficit in fiscal 2023, the Pennsylvania Health Care Cost Containment Council, an independent statewide agency, reported in its annual hospital financial report.

Operating margins

Here is a look at each Erie County hospital's operating margin and total margin (percentage of all revenue to all expenses) for fiscal 2023:

• UPMC Hamot — minus 2.99% operating margin, minus 2.97% total margin
• Saint Vincent Hospital — minus 2.4%, minus 5.33%
• Millcreek Community Hospital — minus 15.68%, minus 7.71%
• Corry Memorial Hospital — minus 4.93%, 0.76%

Posting operating deficits or total deficits is rare for Erie-area hospitals, especially the two largest, Hamot and Saint Vincent.

Hamot hasn't reported a total deficit since fiscal 2003 and an operating deficit since fiscal 1998, according to PHC4. Saint Vincent posted its last operating deficit and total deficit in fiscal 2013.

Net revenues and total operating costs

Here is a look at the net patient revenues and total operating costs for each of Erie County's four acute-care hospitals:

• UPMC Hamot — $512 million in net patient revenue, $551 million in total operating expenses
• Saint Vincent Hospital — $372 million, $406 million
• Millcreek Community — $62 million, $80 million
• Corry Memorial — $26 million, $29 million

'Outdated' data?

Hamot and Saint Vincent officials both called the PHC4 data "outdated" and that it doesn't reflect the hospitals' current financial status. The two Erie hospitals follow a calendar year, so their financial information in the report is from 2022.

For most hospitals, fiscal 2023 ran from July 2022 through June 2023.

"Although PHC4 provides specific submission guidelines, it is difficult to verify that all submitting parties follow the same requirements," Hamot officials said in an emailed statement. "For example, UPMC does not include all of the health system's interest expense, while other hospitals do not include their physician practice expenses."

Rand Levis, Saint Vincent's chief financial officer, said the hospital saw a decline in admitted patients in 2022 while expenses, including clinical staff salaries, continued to rise.

"There was a lot going on in 2022," Levis said. "We were still dealing with COVID, but there was a drop off in revenue as there weren't as many patients admitted, though our outpatient numbers went up."

Crawford County hospitals

Not all of northwestern Pennsylvania's hospitals struggled financially in fiscal 2023.

Meadville Medical Center posted an operating margin of 0.18% and a total margin of 5.05%, while it's sister hospital, Titusville Area Hospital, posted the highest margins in the region, with an operating margin of 9.28% and a total margin of 10.29%.

Meadville Medical earned $237 million in net patient revenue and incurred $254 million in total operating expenses, while Titusville Area earned $54 million and incurred $53 million.

Part of the reason for the Crawford County hospital's financial success was that the they didn't record their COVID-19 government reimbursements until fiscal 2023, said Renato Suntay, the hospitals' chief financial officer.

"Many other hospitals recorded those payments right away, but we just wanted to make sure that we didn't have to give it back," Suntay said.

Inflation, rising staff wages take toll

Rising staff wages, particularly the expenses of using agency — or traveling — nurses, has impacted every local hospital's bottom line, officials said.

The need started during the COVID-19 pandemic when an increase in patients coincided with a nationwide exodus of older nurses and others who left nursing to start other careers.

"At one point we were running 100 to 105 agency nurses," Levis said. "Not only are we seeing fewer agency nurses now, their rate is going down ... from about $200 an hour to around $120 an hour."

But inflation continues to affect hospitals, as the cost of medical supplies and food is much higher than it was before the pandemic.

Rural hospitals, like Corry Memorial, also must pay more to retain valuable staff.

"Rural hospitals have a significant concern," said Jasen Diley, LECOM Health's vice president of affiliated services. "Doctors are migrating from rural settings and hospitals have to pay higher salaries to stay relevant."

The biggest concern is that more rural hospitals will close, PHC4 officials said. They pointed to a gap in maternity services along the northern tier of Pennsylvania east of Erie County.

But all hospitals need to adjust, said Barry Buckingham, PHC4's executive director.

"We are still adjusting to the new normal after COVID," Buckingham said. "It was such a big blast, financially, that there has been a massive reset for these hospitals as they try to navigate this future."

Contact David Bruce at dbruce@timesnews.com. Follow him on X @ETNBruce.