Ken DeFurio, president and CEO of Independence Health System, told employees in a Dec. 11 email the industry is facing significant “headwinds caused by years of the COVID-19 pandemic.”

In spite of these industry challenges, he maintained the merger of the Butler Health System with Excela Health earlier this year was the right course of action.

“If you look closely, you will see that no provider in our region is immune from the financial storm,” the letter read. “Economic conditions are affecting all health systems.”

DeFurio’s Nov. 21 opinion column in the Butler Eagle addressed the unique demands on health systems amid rising costs.

“For years, the payments we receive for services have fallen far short of inflation,” he wrote. “We are dependent on government payments from Medicare and Medicaid, and payments from employer sponsored health insurance.”

DeFurio said health systems must provide treatment — regardless of pay.

“Unlike other businesses, we cannot simply raise prices in response to increased costs,” he wrote. “To be paid adequately, we rely on adequate government payments, and we must negotiate contracts.”

More than a week later, Butler Health System released its financial results for the first fiscal quarter of 2024. Ending Sept. 30, 2023, the quarter showed an operating loss of $12.97 million over the three-month period. Over the same period a year ago, the system lost more than $1.6 million.

Butler Health System reported it had sustained an operating loss of $43.7 million between July 1, 2022, and June 30, 2023.

In DeFurio’s Dec. 11 email, though, he told employees all of the region’s health systems incurred losses of their own.

“Last week, UPMC disclosed that it had suffered an operating loss from provider operations of $325 million for the nine months ended September 30th,” he wrote.

Additionally, he said Allegheny Health Network, or AHN, saw an operating loss of $144 million over the same period.

“My point in providing this context is not at all to find satisfaction in other system’s operating losses,” he wrote, “but rather to emphasize the scope, magnitude, and depth of what is happening in healthcare economics.”

Dan Laurent, AHN spokesman and vice president of corporate communications, acknowledged the ongoing challenges for health systems in the post-pandemic market.

“Like all providers, AHN this year has faced industry-wide cost pressures associated with nursing and other staff shortages, ongoing supply chain concerns, and the inflationary environment,” he said.

Laurent said the provider expected these challenges to continue through the new year, with plans to implement “robust, organization-wide strategies to address them.”

“That said, it’s also important to remember that AHN is part of a large, diversified and financially strong health and wellness enterprise in Highmark Health,” he said.

As such, Laurent said this partnership has provided the stability to make “smart, strategic investments” in staff, patients and the community amid the challenges.

“Patient volumes across AHN continued to improve across the network for the first nine months of 2023 as patients returned to our various care sites post-pandemic,” he said.

Likewise, UPMC’s executive vice president and CFO Fred Hargett said the global system “continued to substantially invest for the long-term,” despite the challenges.

“For example, locally, the opening of UPMC Children’s Express Care and UPMC Magee Women’s Specialty Services,” he said, “both in the UPMC Lemieux Sports Complex in Cranberry in 2020.”

Hargett also noted improvements to the front entrance and lobby at UPMC Passavant in McCandless Township, completed last year.

“During the unprecedented challenges facing health systems nationwide, both during and after the pandemic, UPMC’s commitment to its core mission has not waned,” he said.

In DeFurio’s Dec. 11 email, he assured employees Independence was making its own “considerable progress” following the merger.

“The creation of Independence Health System has allowed us to achieve $60 million in efficiencies and improved cost structure,” he wrote. “Our primary focus now is negotiation of managed care contracts and what we are paid for the work we do.”

According to DeFurio’s opinion column in the Eagle this November, Butler Health System and Excela Health merged with “existing, publicly traded debt.”

“And while losses expressed in multiples of tens of millions of dollars appear large and perhaps impossible to overcome, one must remember that Independence Health System is a $1.13 billion organization,” he wrote. “One percentage point equals $11.3 million.”

Further, DeFurio wrote that the system was already executing a financial improvement plan, with a planned 14% improvement.

“We’ve already achieved about a third of that. We have about a 10% improvement to go. Not small, but possible,” he wrote. “These challenges happened over years. We will not fix them in months. But we will fix them.”

In a statement Friday, Dec. 29, chief marketing officer Tom Chakurda said while those challenges “have been reported on extensively,” the health system remained “abundantly confident in the plans and initiatives it had in place to address and overcome” them.

Closing out his Dec. 11 email, DeFurio reiterated the merger was on the right path.

“The scale, synergies, and efficiencies we have achieved put us in a stronger position moving forward,” he wrote. “Successes are emerging every day.”