See how this health system got out of the negative.
Penn State Health achieved a substantial financial turnaround in 2024, setting the organization up for a much improved year in 2025.
With better performance across several metrics, the organization more than quadrupled its operating income this year.
The numbers:
- Operating income FY24: $56.8 million
- Operating income FY23: net loss of $160 million
- FY24 Improvement: $217 million
Operational performance: 12% improvement in net patient service revenue, totaling $3.8 billion.
Growth contributor: Operations at Lancaster Medical Center (opening in October 2022) and the addition of the Pennsylvania Psychiatric Institute, which became fully integrated into Penn State Health in July 2023, both contributed to Penn State Health’s 2024 growth.
Executive Take
Penn State Health’s CFO said the results come from the organization's disciplined approach and the turnaround has improved its investment opportunities.
“Our disciplined practices have resulted in notable improvements in just one year,” said Paula Tinch, executive vice president of finance and chief financial officer for Penn State Health. “This strong financial position has enabled Penn State Health to further invest in its core missions of patient care, research and training the next generation of physicians.”
Our focus on balancing financial responsibility with meeting the evolving needs of the communities we serve is yielding positive results,” said Deborah Addo, interim CEO of Penn State Health. “We remain committed to operating efficiently to ensure long-term sustainability while consistently reinvesting in key clinical services for the people of Pennsylvania and beyond.”
What Happened In 2023?
Penn State Health attributed much of its losses in FY23 to debt and expenses related to two recently opened hospitals, Hampden Medical Center and Lancaster Medical Center Officials also cited increased costs resulting from inflation and worker shortages.
Officials said the losses stemmed from negative forces impacting all healthcare systems, including higher costs for recruiting and retaining employees as well as supplies.
On top of this, the system had $28 million in debt service related to Hampden and Lancaster medical centers, and investments in information technology.
Outlook and Guidance
The outlook for 2025 is uncertain. With a new presidential administration underway and many healthcare policies up in the air, CFOs need to be prepared for the unexpected.
While it's likely not the right time for riskier investments, if a health system is struggling, CFOs can explore partnerships that could help with operational burden. Outside of this, CFOs should focus on stabilizing their organization’s finances and contributing to reserve funds to fall back on in an unpredictable regulatory environment.
Marie DeFreitas is the CFO editor for HealthLeaders.
KEY TAKEAWAYS
Penn State Health brought in an operating income of $56.8 million in FY24, a $217 million improvement from FY23.
The turnaround came from operations at two other treatment centers under the organization.
CFOs should ensure they stabilize finances as they move into 2025.