Lancaster Medical Center's $72M operating deficit 'not unusual' for new hospitals
Lancaster County hospitals posted some of the best and worst financial results in the state during fiscal year 2023, according to an independent report.
Penn State Health Lancaster Medical Center
Only three hospitals in the state posted higher operating deficits during the fiscal year than Lancaster Medical Center, according to the Pennsylvania Health Care Cost Containment Council's Financial Analysis 2023 report, which delves into the finances of Pennsylvania's general acute care hospitals. An operating deficit indicates the hospital is spending more to run than it takes in — $72 million dollars in Lancaster Medical Center's case.
A deficit here is "not unusual" for a new hospital, spokesperson Scott Gilbert said. The 142-bed hospital at 2160 State Road, East Hempfield Township, opened three months into the 2023 fiscal year, on Oct. 3, 2022.
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New hospitals can take years to achieve positive operating margins, Gilbert said. There are two reasons for that: the capital and operating investments required to open a hospital, he said, and the process a new hospital must go through in order to be paid for all of the care it provides.
Net patient revenue from Medicare at Lancaster Medical Center was 27.79%, slightly lower than the other three hospitals in the county. For uncompensated care, the percentage of the care provided by the hospital that isn't paid for — which includes charity care and debts that can't be collected — Lancaster Medical Center's number was 2.33%.
Penn Medicine Lancaster General Hospital
Penn Medicine Lancaster General Hospital's operating income in fiscal year 2023 was $113 million, which is the eighth highest in the state and more than double the combined operating incomes of two of Lancaster County's four hospitals — UPMC Lititz and WellSpan Ephrata.
"Penn Medicine Lancaster General Hospital is among Pennsylvania's 10 largest hospitals in terms of inpatient beds, inpatient and outpatient volume, and patient revenue," spokesperson Marcie Brody said. "The large revenue base across our health system enables us to leverage our infrastructure across our services. This in turn helps to support our operating income."
Five-hundred-twenty-five bed Lancaster General Hospital at 555 N. Duke St. in Lancaster city had an operating margin of 7.66% in the fiscal year, a measure that compares the operating income to the total operating revenue. The operating margin shows the amount of dollars earned by the operation of the hospital, per dollars spent to fund its operation.
And between 2020 and 2023 the hospital had an average change in total operating expenses of 8.73% — the largest of the Lancaster County hospitals shown in the report.
Brody attributed that growth to rising costs of labor — something she said affects health systems nationwide — and to rising costs of drugs, medical devices and other supplies.
Lancaster General Hospital's net patient revenue was $1.330 billion in 2023 — the highest of any Lancaster County hospital in the report — and grew an average of 8.49% since 2020.
Lancaster General Hospital's Medicare share of its net patient revenue was 34.50% and its percent of uncompensated care was 1.44% that year.
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UPMC Lititz
UPMC Lititz was second to Lancaster General Health in the county when it came to operating income with $31 million during fiscal year 2023.
But at 24.24%, the 148-bed hospital at 1500 Highlands Drive in Warwick Township had the largest 2023 operating margin of the four Lancaster County hospitals included in the report. It also saw its total operating expenses shrink over the last three years by an average of 1.15%.
The hospital had a net patient revenue of $115 million in 2023, which put it at number three out of Lancaster County's four hospitals. The hospital's net patient revenue grew by an average of 6.52% between 2020 and 2023.
The Medicare share of the net patient revenue was 34.54%, and the percent uncompensated care was 4.16%, both the highest for the county.
WellSpan Ephrata Community Hospital
WellSpan Ephrata earned $21 million in operating income in 2023. The hospital's operating margin was 7%, and its total operating expenses between 2020 and 2023 grew by 7.75%.
Of all the Lancaster County hospitals in the report, WellSpan Ephrata had the most growth in its net patient revenue. The 141-bed hospital at 169 Martin Avenue in Ephrata Borough had net patient revenue of $292, which increased an average of 11.31% between 2020 and 2023.
At 1.17%, WellSpan Ephrata's percent of uncompensated care was the lowest in the county in 2023. The hospital's Medicare share of its net patient revenue was 29.65%.
