Butler Health System assures patient care won’t change despite financial losses
The operating loss of $43.7 million for the 12-month period ending June 30 reported earlier this week by the Butler Health System — one portion of the newly merged Independence Health System — is being “absorbed by the balance sheet,” according to a hospital official.
Independence Health System’s chief financial officer Tom Albanesi, in a Thursday interview, said patient care will not be affected and no further layoffs are planned.
“The operating losses are currently being absorbed by our balance sheet,” Albanesi said. “While we cannot do that forever and need to improve our financial performance, it means that we continue to provide the same high-quality care that we’ve been providing for over 100 years.”
On Tuesday, Nov. 7, the Butler portion of Independence Health System reported an operating loss that was nearly double the loss that Butler Health System reported over the same 12-month period last year, which was $22.7 million.
Added onto losses suffered by Westmoreland County-based Excela Health, which merged with Butler Health System at the start of the, the combined Independence Health System suffered a total financial loss of $79.3 million for the period ending June 30.
Albanesi said stagnant reimbursement rates from health insurance providers such as Highmark and UPMC have not been enough to make up for operating costs.
“The rates we receive for providing care were not inflated to offset those rising costs,” Albanesi said. “Unlike most businesses, we cannot raise our prices unilaterally.”
He also attributed Independence’s growing financial losses to the impact of COVID-19 on the health care industry. In the wake of the pandemic, hospitals across the country are dealing with inflation and staff members leaving the industry due to burnout, and the Independence Health System is no exception.
However, Albanesi said Butler Health System’s financial situation would be even worse off without the merger than it is now.
“The merger with Excela has had a positive impact on our financial performance and will still yield additional synergies that have not yet been realized,” Albanesi said. “Many synergies were identified that led both predecessor health systems to approve the merger. In the health care industry, being larger creates scale, which can translate into improved financial performance.”
Butler Health System and Excela Health officially merged this January, after plans for the merger were announced in June 2022. This created a singular hospital network of five hospitals across three counties, including Butler Health’s two hospitals — Butler Memorial Hospital and Clarion Hospital — along with Excela’s three hospitals in Westmoreland County. The new hospital system was officially renamed to Independence Health System this May.
Since then, the newly combined hospital system has laid off at least 226 staff members, including 13 manager-level positions, who were let go in March, just two months after the merger took effect.
Despite this, Albanesi said no further layoffs are around the corner.
“We continue to provide competitive salaries and benefits for our biggest asset, our employees,” Albanesi said. “At this time, there are no additional reductions in workforce planned.”
In recent months, multiple rating agencies have downgraded the credit rating for the Butler Health System, citing numerous red flags. These include Fitch Ratings, who downgraded BHS from an “A” rating to a “BBB” rating in June, and Moody’s, who knocked BHS down from Baa2 to Baa3 in May.
For the time being, both Butler Health and Excela Health are maintaining separate financial records even after the merger.
According to Albanesi, the hospital system is taking action to stop the financial bleeding. They have employed the services of Washington, D.C.-based FTI Consulting to develop a financial improvement plan.
“Among the many initiatives included in the plan are an increased wage index, workforce initiatives, and enhanced reimbursement from managed care payers,” Albanesi said. “These initiatives are in various stages of implementation.”
According to Thursday’s report, Butler Health System is projecting an operating loss of $22.8 million for the year ending June 30, 2024, which would bring the numbers back to where they were in 2022.
