Hospital reports fiscal loss

Temple University Health System is recovering from a large operating shortfall from the first two quarters of the year while officials analyze the reasons for the decline in patient volume that led to the loss.

Temple University Health System is recovering from a large operating shortfall from the first two quarters of the year while officials analyze the reasons for the decline in patient volume that led to the loss.

The $44.8 million loss was mainly caused by a lessened capacity to admit and treat patients, as well as stringent terms set by third-party payers, according to Robert Lux, chief financial officer of the health system.

“Programs that were scheduled to grow [and] physicians that were scheduled to be hired did not move as quickly as anticipated,” Lux said.

The health system is recovering from the loss, Lux said. Although no details were given for the period after December 2005, he stated in an e-mail, “Generally our performance is improving as we strive to increase our patient volumes and further control our expenses.”

A decreased flow of patients through the hospital’s emergency room and Ambulatory Care Center contributed to decreased revenues. The construction of the ACC, which lasted more than a year and included a complete renovation of the emergency department, lessened the volume that both the ACC and the emergency department could handle.

“The ACC is a significant portion of their [Temple Hospital’s] revenue,” said Dr. William Aaronson, director of the Cochran Research Center at the Fox School of Business, indicating that any reduction of the ACC’s processes could financially hurt the health system.

In addition, the Medical College of Pennsylvania, which in the past had directed many of its emergency room patients to Temple Hospital, closed in 2004. Most of those prospective patients are now taken to hospitals further east.

Lux emphasized that while these causes are specific to Temple, there are broader problems that have affected health care across the country.

“I don’t think what we’re seeing here is a unique Temple issue,” Lux said. “There are some larger trends at work here in the industry.”

The health system expected to make $1.7 million in operating revenue in the period it experienced the loss, according to the credit rating firm Standard and Poor’s. This outlook reflected the “substantial growth” Lux said the health system experienced for the preceding four years.

“In terms of quality and reputation, Temple [Hospital] really turned around,” Aaronson said. “So the decline in admissions is really quite a surprise.”

One issue is the criteria insurance companies set for what ailments can be treated on an inpatient basis. As the criteria become more rigorous, more people have to be treated as outpatients.

But for much of North Philadelphia’s underinsured demographic, elective care – typically done on an outpatient basis – is not a viable option.

“As the availability of health insurance becomes less and less and the number of people who are either underinsured or uninsured increases, people do not naturally seek elective care,” Lux said.

Aaronson speculated that Temple might no longer be on some insurers’ preferred-providers’ lists. If that were the case, Temple would be a more expensive provider.

“The financial pressures have increased every year,” said Andrew Smith, a spokesperson for the health system. “Medicaid, Blue Cross, private insurers – we’re not getting any more money out of them. If anything, these programs decrease a little every year.”

The Commonwealth of Pennsylvania paid $5 million less in the first quarter of fiscal year 2006 than during the same period of the last year, according to a press release from the credit rating firm, Moody’s Investors Service. Information for the second quarter was not given.

“Health care is a very volatile industry,” Lux said. “Government, when it chooses, can change the rules of the game.”

The hospital may be able to recover a good portion of its lost revenue through Disproportionate Share Hospital payments, which are given by Medicare and Medicaid at the end of the year to hospitals that treat a large number of low-income patients.

This puts Temple in a “unique position to receive state funding,” according to Aaronson.

Lux said the main focus for recovery is to emphasize key programs and remove any impediments of access between doctors and patients.

“In order to grow, you need to make sure that people can access your physicians – that it’s convenient to do so and that it’s easy to do so,” Lux said.

Said Smith: “The CEO [of the health system, Joseph W. Chip Marshall III] says, ‘We’re going to grow our way out of this, not cut our way out of this.'”

Andrew Thompson can be reached at

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