Financial Performance of Independence Health System Hospitals vs Former Butler and Excela Health Systems
Independence Health System’s Hospitals Show Positive Operating Revenue Despite Losses in Former Systems
Independence Health System’s five hospitals have reported positive operating revenue for the fiscal year ending June 30, despite significant losses in the former Butler and Excela health systems. Latrobe Area Hospital led the way with $22.5 million in excess operating revenue, followed by Westmoreland Hospital at $16.9 million and Frick Hospital at $7.3 million. Butler Memorial and Clarion also posted positive numbers, but the former health systems saw losses of $38 million and $26.2 million, respectively.
The increase in losses can be attributed to rising expenses, including covid-19 related costs, wage inflation, and higher pharmacy and medical supply expenses. Independence Health’s leadership is working on a financial improvement plan to reduce losses in 2024, aiming to drop to about $24 million. However, the system’s chief financial officer, Thomas Albanesi, noted that it is difficult to predict when the health system might turn a profit.
One of the key challenges faced by the health system is inadequate reimbursement rates from government programs like Medicare and Medicaid, which fail to cover the costs of services provided. Albanesi emphasized the need for updated payment rates to reflect the financial reality of operating a hospital. Additionally, physician reimbursement rates from governmental and third-party payers are also insufficient, leading to operating losses that must be funded from profitable hospital operations.
Despite the challenges, Independence Health CEO Ken DeFurio remains optimistic about the future of the health system. He acknowledged the difficulties of merging two legacy health systems but expressed confidence in the financial improvement plan laid out to bondholders. Looking ahead, DeFurio suggested that Independence Health could be a good option for other regional health systems seeking affiliation.
Overall, Independence Health System’s ability to maintain positive operating revenue in the face of losses in former systems highlights the resilience and determination of the organization to overcome financial challenges and continue providing quality healthcare services to the community.