Butler Health System works to stabilize losses
After nearly a year and a half of financial strain, the recently merged Butler Health System is showing signs of stabilizing losses.
According to numbers for the system’s consolidated group, Butler Health System’s second-quarter results for the 2024 fiscal year show a loss of just under $4 million for the quarter which ended Dec. 31, 2023. While this is still red ink, it is a resounding improvement over the numbers from the same period 12 months earlier, when the system posted losses of just over $21 million.
Most tellingly, the system posted $120.7 million in revenue for the quarter, an improvement of more than $9 million from the same period 12 months earlier.
Meanwhile, expenses for the hospital system went in the opposite direction. For the most recent quarter, the health system posted $124.7 million in total operating expenses, roughly $8 million less than the same period in 2022.
“Expenses are being very tightly managed and that's been very helpful,” said Tom Albanesi, chief financial officer for Independence Health. “We’re working harder on getting revenue increases that will affect future quarters.”
At the start of 2023, Butler Health System merged with Westmoreland County-based Excela Health, and the merged entity was renamed Independence Health. Both Butler and Excela are maintaining separate financial records for the time being.
According to the “obligated group” column in the financial report, Butler Health System posted $114.7 million in revenue against $119.8 million in expenses, for an operating loss of roughly $5.1 million. This is an improvement over the same quarter in 2022, when the system posted a loss of $21.9 million, with just $88.4 million in revenue.
The “obligated group,” which is made up of entities used to guarantee debt for the Butler Health System, consists of Butler Memorial Hospital, Clarion Hospital, Butler Medical Providers, and the realty management services company Nixsar. The discrepancy between consolidated, which includes all entities of the two hospitals, and obligated revenue figures for 2022 is largely attributable to the addition of Clarion Hospital to the Butler Health System portfolio in February 2023, according to Albanesi.
Meanwhile, the figures for Excela Health told a similar tale. The other half of the merger posted a $5.4 million loss for the second fiscal quarter of 2023, an improvement from the $13.3 million loss it posted during the same period a year ago, according to the system’s consolidated group figures.
Before the end of 2023, Butler Health System put into action several measures to cut costs. These included outsourcing some heart care services to a private practice based in Weirton, W.Va., as well as implementing a financial improvement plan with the help of Washington D.C.-based FTI Consulting.
To date, the health system has implemented 64 initiatives that have saved about $31 million by the end of 2023. These include supply chain optimization and Medicare wage index adjustments.
“We’re on target with where we planned to be,” Albanesi said. “Some initiatives are ahead of others. It’s a work in progress, but we’re on track with the plan.”
According to Butler Health System’s quarterly financial disclosure, there are 52 initiatives from the financial improvement plan which have not yet been implemented. These initiatives have the potential to create $13.9 million worth of savings. These improvements are scheduled to be implemented by the middle of the 2025 fiscal year.
“We’ve got a lot of work to do, and we're going to continue to be steadfast until we become solidly profitable quarter over quarter over quarter,” Albanesi said.
This story was updated Feb. 26 to reflect additional information.
