Tyrone Hospital shows improvement on health care cost containment

Tyrone Hospital made major strides in improving its containment of health care costs based on figures released in an annual report from a state agency which keeps an eye on such costs.
The agency reported Tyrone Hospital’s loss was 9.5 percent for the fiscal year ending in June. In 2003, the figure was 33 percent.
A spokesperson for the hospital, Theresa Yanchetz, said one reason for the progress was the hospital received a federal designation known as “critical-access status.”
Yanchetz said the status was something the hospital was eligible for as a small rural facility. She noted 57 percent of the hospital’s patients use Medicare. The critical status designation allows the hospital full reimbursement for taking care of Medicare patients. She explained that a large portion of the payments the hospital receives are for Medicare.
Yanchetz also noted that CEO Walter Van Dyke explained the hospital is also seeking better deals with insurance companies. The effort is designated to generate more money for the hospital which should contribute to an improving financial picture.
Yanchetz indicated the improvement shown in the Pennsylvania Health Care Cost Containment Council report shows “significant progress” and a “huge change” for the hospital.
According to a release on Friday posted on the PHC4 Web site, the statewide total financial margin realized by Pennsylvania’s general acute care hospitals grew by more than a full point in Fiscal Year ’04, rising from 2.30 percent in Fiscal Year ’03 to 3.37 percent in Fiscal Year ’04, according to the latest hospital financial figures released.
The agency said the improvement was driven by large gains in non-operating income, which rose from $34 million in Fiscal Year ’03 to $330 million in Fiscal Year ’04. Increases in net patient revenue kept pace with operating expenses at eight percent respectively statewide. Medicare revenue increased by only 4.1 percent, while substantial increases in revenue from commercial health insurance plans (10 percent) and the state’s Medical Assistance program (15.2 percent) made up the difference.
“The growth in Medicare revenue continued to lag far behind that of other third-party payers,” stated Marc P. Volavka, Executive Director of PHC4. “Commercial health plans have emerged as the single largest source of hospital net patient revenue, supplanting Medicare.”
The PHC4 release said, although non-operating income caused the statewide total margin to rise in FY04, operating gains were primarily responsible for pulling many hospitals out of the red during FY04. Thirty-eight hospitals produced positive total margins in FY04 after posting losses in FY03. Improvement in operating income was the primary factor that brought 26 of the 38 hospitals into the black during FY04. The agency noted operating income also was the primary factor that caused ten of eleven hospitals to post losses in FY04 after being in the black in FY03.
“Fewer hospitals posted losses in FY04 than FY03,” said Volavka. “However, one year of improved margins does not constitute a trend, and the continuing lag in Medicare reimbursements should send out red flags, but hopefully these gains will be sustained going forward.”
The press release said managed care plans continued to drive the increases in patient revenue. Commercial managed care plans, together with managed care plans funded by Medicare and Medical Assistance, provided almost half of the statewide patient revenue during FY04. Managed care plans were responsible for 70 percent of the increase in patient revenue during FY04.
The average revenue per discharge grew 11.9 percent for commercial managed care plans, 9.4 percent for medical assistance managed care plans and 6.4 percent for Medicare managed care patients. In contrast, the overall statewide average revenue per discharge increased by 5.2 percent.
The press release from PHC4 explained the council is an independent state agency charged with collecting, analyzing and reporting information that can be used to improve the quality and restrain the cost of health care in Pennsylvania. The report released last week is available on the Council’s Web site at or by calling PHC4 at (717) 232-6787.