HARRISBURG - Many Pennsylvania hospitals are on wobbly financial ground, according to a report set to be released Thursday that found 1 in 5 are losing money.

One-third of Pennsylvania's hospitals didn't make enough money from patients, insurers and the government to cover the cost of services last year, according to the report by the Pennsylvania Health Care Cost Containment Council.

Many of those hospitals leaned on investments and fundraising to make up the difference.

The findings come as Gov. Tom Wolf's administration eyes cuts to the state's Medicaid program, which industry lobbyists warn aren't helping the state's ailing health system.

Andy Carter, president and CEO of the Hospital and Healthsystem Association of Pennsylvania, said healthcare providers "whole heartedly" support Wolf's aim to expand coverage to more uninsured people.

"In light of this goal — and hospitals’ many investments and the large projected increase in Medicaid enrollees — we question why the proposed state budget calls for $166.5 million in cuts," Carter said. "On the contrary, now is the time to strengthen the capacity of the hospital community.”

It's still too soon to say how Medicaid expansion, made possible by the Affordable Care Act, is affecting the state's hospitals.

The council's report found that overall hospital profits dipped from about 6.1 percent in fiscal 2013 to 5.7 percent the next year.

Joe Martin, executive director of the council, noted that many hospitals showed "relatively healthy margins" in fiscal 2014, though one-third lost money on operations.

Not reflected in those results is the effect of Medicaid expansion, which was just getting underway in Pennsylvania at the end of 2014, noted Antoinette Kraus, director of the Pennsylvania Health Access Network, which championed efforts to broaden the program that typically serves low-income workers.

Pennsylvania’s move to offer Medicaid to 650,000 more working adults was delayed as former Gov. Tom Corbett struggled to get federal approval of certain conditions - including a requirement that people signed up for the insurance look for better jobs.

Wolf has since discarded Corbett’s plan and is moving to add newly insured people to traditional Medicaid programs.

Wolf spokesman Jeff Sheridan said adding patients to the insurance rolls is a benefit for hospitals because it expands access to medical services, cuts down on emergency room visits and sends healthcare providers more revenue.

However, Wolf's proposed budget includes $166.5 million in cuts and taxes that will affect hospitals. Those include a plan to ax $36.5 million in supplemental Medicaid payments for burn care, obstetrical and neonatal intensive care, and for rural critical access hospitals.

He also proposes a $130 million hike in the Hospital Quality Care Assessment, which is the tax on nonprofit and investor-owned hospitals, to shore up the budget for the Department of Human Services.

Sheridan acknowledged that cuts to supplemental payments are likely come up in budget negotiations. He said the cuts will be offset by increased federal payments tied to an expanded Medicaid program.

Kraus said that expansion may be especially helpful for rural hospitals.

Her group estimated more than 400,000 rural adults lacked health insurance in Pennsylvania before the program was expanded.

Rural populations are more likely to suffer chronic health problems like hypertension, diabetes, heart disease and arthritis, she said.

But Martin, at the cost containment council, said it’s too early to tell if expanding Medicaid helps hospitals that are in the red.

Theoretically it moves patients from the ledger of those who receive uncompensated care and makes them patients whom hospitals get paid to treat, he said.

But those expecting Medicaid expansion to help hospitals will be disappointed, said Denis Lukes, vice president and chief financial officer at the Hospital Council of Western Pennsylvania.

“That’s a fallacy,” he said, noting that much of the increased business comes in outpatient services. And government reimbursements for those services are typically low; hospitals estimate it’s about 30 percent of their costs.

Martin said that rural hospitals, in particular, struggle because they tend to treat more people who are covered by Medicare and Medicaid. Treating Medicaid patients may be better than treating people with no insurance, but it’s not as lucrative as serving people who have private insurance.

“No one disputes that private-sector health insurers pay more than the government programs,” he said.

John Finnerty covers the Statehouse for CNHI's Pennsylvania newspapers. Reach him at jfinnerty@cnhi.com.

2014 bottom line at rural hospitals

Hospital Revenue Expenses Difference
Geisinger $950 million $934 million $16 million
Conemaugh $360 million $372 million -$12 million
Evangelical $152 million $141 million $11 million
Somerset $62 million $64 million -$2 million
Titusville $22 million $29 million -$7 million
Meadville $150 million $151 million -$1 million
Jameson $105 million $110 million -$5 million
Sharon $35 million $38 million -$3 million
Windber $36 million $45 million -$9 million
Sunbury $21 million $31 million -$10 million

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