Penn State Health reports revenue growth for FY 2023 and Q1 2024 and improved operating income in the first quarter

New hospitals and cost management initiatives driving improved results

Penn State Health reported its financial results for fiscal year 2023 and the first quarter of 2024 and delivered improved revenue for both periods. Fiscal year 2023 reflected the benefit of growing net patient service revenues from its expanding health system as well as the impact of continuing cost pressures caused by inflation, increased labor costs and investments made to grow in service to the people of central Pennsylvania.

November 27, 2023Penn State Health News

“I’m pleased to see the financial performance of Penn State Health steadily improving amid this challenging climate for health care,” said Steve Massini, CEO of Penn State Health. “We remain diligent in our efforts to be fiscally responsible yet responsive to the evolving needs of the communities we are privileged to serve.”

For fiscal year 2023 (ending June 30), Penn State Health reported an operating loss of $160 million, due in large part to factors that continue to affect the broader health care industry. These include increased costs to recruit and retain staff and higher supply chain costs due to inflation. Also contributing to the loss were anticipated expenses related to growth investments in the health system, including approximately $28 million in debt service incurred to build Penn State Health’s two newest hospitals: Hampden Medical Center and Lancaster Medical Center. The health system also invested in new information technology (IT) systems. These pressures are being addressed by dedicated, ongoing cost discipline initiatives.

Penn State Health delivered improved revenue in Q1 Fiscal ‘24 (ending Sept. 30) compared to the same quarter a year ago. Net patient service revenue increased 13.5 percent compared to the same quarter a year ago. The $917.6 million in revenue was higher than the amount budgeted for that period. The operating income line also trended better in the first quarter compared to the same period a year ago. The health system credits these early improvements to a renewed focus on strong fiscal management, financial stewardship and operational efficiencies.

Improved first quarter financial performance was in line with the organization’s long-term financial plans and expectations given the ongoing cost pressures and the impact of inflation on operations.

As revenues grew in Q1 Fiscal ‘24, operating expenses also continued to rise due to higher costs for labor and medical supplies that reflect the impact of inflation, as well as the costs related to opening and operating two new hospitals. Penn State Health continues to employ rigorous cost mitigation efforts, although it will take time to realize the resulting savings. These measures include the recruitment and training of international nurses to reduce the use of agency nurses. The health system is also intent on improving results by further controlling operating expenses, utilizing resources effectively and growth through enhancing access in the markets it serves.

Penn State Health continued to maintain its level of Days Cash on Hand at 94 days at the close of the fiscal year and for the quarter ending September 30, providing adequate operating cash to run the enterprise.

“The tangible outcomes of our dedicated cost discipline efforts and enhanced revenue streams are driving improved results,” said Paula Tinch, executive vice president and chief financial officer for Penn State Health. “We will continue to adapt as necessary to successfully position the health system for long-term success.”

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