Executives at the West Penn Allegheny Health System credit both plus more competition from Pittsburgh's suburbs for pressure on its operations and the major consolidation of its Pittsburgh hospitals. All these factors, they say, forced the system to write off $70.7 million last year in discontinued operations and record another $11.8 million in consulting and severance expenses.
The restructuring expenses, part of an ongoing turnaround effort, left the system with a net loss of $63.1 million for the year that ended June 30, up from the prior year's net loss of $25.2 million, according to financial statements released this week.
That's despite the fact that West Penn Allegheny's operating losses declined to $19.2 million in 2010 from $38.5 million in 2009 and $88.8 million in 2008. “Restructuring is painful and requires financial resources,” said Christopher Oliver, the system's president and CEO, in a letter to investors. In late October, the system said its consolidation plans would cut more than 800 jobs, including 400 layoffs. The remaining employees resigned or found jobs elsewhere in the system. (Another 65 jobs were relocated.) That's less than the 1,500 job cuts initially announced in June, when the system said it would reduce hospital capacity at its Western Pennsylvania Hospital by more than half. That news followed shortly after the system said it would discontinue inpatient and emergency services at its 59-bed campus of Allegheny General.
Kelly Sorice, a West Penn Allegheny spokeswoman, said the system is undergoing a transition that is leading the system in the right direction. “We said we would be restructuring,” she said. “We're in the middle of that restructuring.”