Crozer-Keystone Health System lost $31.6 million in the first nine months of its fiscal year, as the five-hospital system based in Upland, Pa., continues to face lower-than-projected admissions across the board.
In the nine months ended March 31, Crozer-Keystone's operating revenue totaled $575.8 million, or about 6.9 percent below budget. That also equated to a -5.5 operating margin, compared with a budgeted margin of 1.3 percent. Excluding a $6 million one-time charge for severance costs — Crozer-Keystone cut 250 positions in February — the system still faced a -4.4 margin.
Admissions, births, surgeries and observation visits were all below budget, which resulted in the low revenue total. Admissions dropped 3.8 percent compared with expectations, while observation cases plummeted 7.3 percent. Emergency department visits have also been down significantly — they were 7.2 percent below budget.
The poor financials led Moody's Investors Service to downgrade the credit rating of Crozer-Keystone by two notches Tuesday. Crozer-Keystone's rating fell from "Baa3" to "Ba2", which is junk bond status. Moody's also affirmed its negative outlook on the system.
"Longer-term fundamental challenges facing the system and impeding a return to positive performance include a large unionized work force, ongoing declines in total admissions, high Medicaid exposure and need for increased capital spending as the average age of the facilities has risen to nearly 20 years," Moody's analysts said. Crozer-Keystone also faces increased competition from neighboring providers and an "underfunded" defined benefit pension plan.
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