Meadville Tribune

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May 16, 2013

In the red: MMC says report doesn't paint complete financial picture

MEADVILLE — A new financial report shows Crawford County’s two hospitals are diverging financially.

The report from the Pennsylvania Health Care Cost Containment Council for fiscal 2012 shows Meadville Medical Center’s total operating expenses outpaced its patient revenue by $3 million while Titusville Area Hospital was able to report a $1 million profit.

The fiscal year runs July 1 through June 30 the following year. Fiscal 2012 the period covers July 1, 2011, through June 30, 2012.

However, the Health Care Cost Containment Council report doesn’t present MMC’s total financial picture for fiscal 2012, according to René Suntay, the hospital’s chief financial officer.

When other revenue sources are added — from enhanced government reimbursement for electronic medical records to leases for physician offices — MMC earned another $6 million in fiscal 2012, Suntay said.

As non-profit community hospitals, by law Meadville Medical Center and Titusville Area Hospital must reinvest any profits they make in equipment and buildings or new services for patients.

MMC’s net patient revenue for fiscal 2012 was $143 million, but its total operating expenses were $146 million, according to the report.

“When you add in contracted services — dietary services, arrangements for leases and meaningful use dollars — our total operating revenue was $149 million,” Suntay said Wednesday.

Meaningful use dollars are additional government reimbursement for hitting performance targets in the use of electronic medical records and additional insurance reimbursement from Highmark Blue Cross Blue Shield for hitting performance targets, Suntay said.

For the past several fiscal years, MMC’s net patient revenue hasn’t kept pace with its expenses.

In fiscal 2011, MMC had about a $2 million loss as net patient revenue was $136 million while total operating expenses were $138 million; in fiscal 2010, a $3 million loss as net patient revenue was $131 million and total operating expenses were $134 million; in fiscal 2009, a $4 million loss as net patient revenue was $124 million and total operating expenses were $128 million.

While Titusville Area Hospital was able to post a profit via net patient revenue versus its total operating expenses, it has been at break-even or a $1 million loss the previous three fiscal years.

Titusville Area Hospital’s net patient revenue for fiscal 2012 was $33 million, but its total operating expenses were $32 million, according to the report. In fiscal 2011, Titusville’s net patient revenue and its total operating expenses both were at $31 million. In both fiscal 2010 and 2009, Titusville posted losses of $1 million with net patient revenue at $29 million each year and total operating expenses at $30 million each year.

As in years past, more than half of the two hospitals’ revenue in 2012 came from Medicare and Medical Assistance.

Medicare is the federal health care insurance program for those age 65 and older and for the disabled, while Medical Assistance is a state medical care plan funded by the federal government and pays for public assistance recipients.

Anthony Nasralla, president and chief executive officer for Titusville, said the hospital could face some tough financial times in the future because of its higher than average dependence on Medicare and Medicaid.

“Pennsylvania’s decision not to expand Medical Assistance will adversely affect our uncompensated care volumes, especially in light of the scheduled Medicare reductions that the (federal) Affordable Care Act contains, because the uninsured population was supposed to shrink,” Nasralla said in a statement Wednesday.

He said that Titusville Area Hospital’s uncompensated or charitable care was 5.78 percent, compared to a state average of 2.78 percent.

“While we were pleased to show a positive margin in 2012, we have recently seen a reduction in Medicare reimbursement due to the budget sequester and the Affordable Care Act will cut disproportionate share funding this year for hospitals (like Titusville Area Hospital) who serve an older/poorer population.”

Of MMC’s $143 million in revenue in fiscal 2012, 41.98 percent came from Medicare and 7.02 percent came from Medical Assistance payments. Its percentage of uncompensated or charitable care was 2.26 percent.

Of Titusville’s $33 million in revenue in fiscal 2012, 53.10 percent came from Medicare and 9.03 percent came from Medical Assistance payments. Its percentage of uncompensated or charitable care was 5.78 percent.

The average for all hospitals in the northwest region was 45.65 percent of revenue came from Medicare and 10.31 percent came from Medical Assistance with another 2.76 percent in uncompensated or charitable care.

MMC’s operating margin for 2012 was positive at 2.32 percent, and its total margin for 2012 was 4 percent. Titusville’s operating margin for 2012 was 3.64 percent, and its total margin for 2012 was 4.50 percent.

Titusville Area Hospital’s total margin of 4.50 percent ranked it seventh out of 23 hospitals in the region, while Meadville Medical Center’s total margin of 4 percent ranked it 10th out of 23.

Total margin is the ratio by which revenue exceeds expenses divided by total revenue. The regional total margin average was 3.33 percent, and the statewide average was 5.82 percent.

Keith Gushard can be reached at 724-6370 or by e-mail at kgushard@meadvilletribune.com.

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