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Penn State Health reports improved financial performance for first six months of fiscal year

Mix of greater income from new hospitals, increased surgical volumes and cost savings help drive improved results

Penn State Health delivered improved financial performance across a range of key metrics for the first six months of fiscal year 2024. Several factors contributed to improved operating income, including steady increases in patient volumes at Lancaster Medical Center and Hampden Medical Center as well as additional patient beds opening at both facilities. The health system also saw increases in emergency department volume, surgical volume and outpatient clinic visits.

From July to December 2023, Penn State Health’s operating revenue improved by $268 million compared to the same period a year ago, driving $23 million in operating income compared to a $114 million loss for the same period in the prior year. Operating income was also boosted by a one-time payment related to the transition of Pennsylvania Psychiatric Institute after Penn State Health became the sole operator when the previous joint venture ended. Even without the one-time benefit, performance still improved substantially.

“Our efforts to be fiscally responsible while also responding to the needs of the communities we serve are working,” said Steve Massini, CEO of Penn State Health. “We are committed to operating efficiently for our long-term sustainability while always delivering the best quality medical care and experience to the people of Pennsylvania and beyond.”

Penn State Health saw improvements across several performance metrics as compared to the prior fiscal year. They include debt service coverage, total debt to cash flow and operating margin. The health system continues to have sufficient cash on hand; its total unrestricted cash and investments improved during the period; and its cash to debt ratio also improved.

Penn State Health has been actively identifying opportunities for greater efficiencies amid continued cost pressures caused by inflation and increased labor costs. The health system reduced its expenses during the period through supply chain savings.

Although the cost of labor continues to rise, Penn State Health has been able to decrease its reliance on agency nurses and outside physicians so far in FY24 as compared to the year ago period.

Following its rapid growth in recent years, Penn State Health’s financial position has stabilized. Currently, more than 20 optimization projects are underway in a continued effort to improve efficiencies, leverage economies of scale, share best practices and better align the entities across its system.

Massini noted Penn State Health’s clinical brand remains strong, and its relationships with Highmark Health and Penn State continue to draw people toward the system.

“Our improved financial performance signals the long-term success of Penn State Health even at a time when health systems nationwide are experiencing significant headwinds,” said Paula Tinch, executive vice president and chief financial officer for Penn State Health. “However, we realize we have more work ahead as we continue to drive our revenue growth and continue to improve our operating costs.”

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