West Penn Allegheny Health System, Pittsburgh, told investors that a previously announced $67 million write-off stemmed from three years of overstated patient revenue. The five-hospital system, in unaudited financial records, said efforts to correct the error contributed to an operating loss for fiscal 2008 of $93.9 million on revenue of $1.5 billion. West Penns fiscal year ended June 30.
The disclosure is the latest sour note for West Penn in a year of executive turnover and rocky finances. West Penn said in July that it would lower revenue by $73 million, including $67 million from overstated patient accounts. At the time, it was unclear how far back errors occurred. In 2007, errors estimating expected patient revenue inflated revenue figures by $5.4 million, the latest records show. The prior year, mistakes wrongly added $13.1 million. The adjustment prompted an informal inquiry by the Securities and Exchange Commission, said Tom Chakurda, a spokesman for West Penn.
In a letter to investors, Christopher Olivia, who arrived as president and chief executive officer of West Penn in March, said the system hired an accounting firm to review its practices along with turnaround company Wellspring Partners. Efforts are expected to save $66 million and have yielded $33 million in savings to date, he said. One estimate of West Penns financial healththe number of days it could continue to operate on cash reserves aloneremains above 50 days, Olivia said. -- by Melanie Evans