University of Pennsylvania Health System posts robust 2014 financials

University of Pennsylvania Health System, Philadelphia, one of the largest academic medical centers in the country, recorded massive gains in its revenue and surpluses last year, while keeping expenses in check.

In fiscal 2013, ended June 30, the health system's operating margin hit 5.3%. But in fiscal 2014, the operating margin jumped to 7.4%, according to audited financial statements.

The jump was largely attributable to a lower growth rate in expenses. UPHS said revenue increased 12.5% to $3.9 billion in 2014, while expenses rose at a lower 10% rate. Its malpractice insurance costs actually decreased year-over-year, a trend seen nationwide as more providers consolidate. That led to a $291.4 million operating surplus in 2014, a 57% jump from the $185.1 million operating surplus in 2013.

Including investment income, the system's total surplus soared 48% to $438.6 million.

UPHS also disclosed details of its transaction with 220-bed Chester (Pa.) County Hospital. In January 2013, Chester County Hospital signed a nonbinding letter of intent to join UPHS. That deal went into effect Sept. 1, 2013. Under terms of the deal, UPHS acquired Chester County Hospital's $275 million in assets and assumed the hospital's $119 million debt load. The addition of Chester County Hospital was one reason UPHS' revenue and expenses increased year-over-year.

UPHS has not yet released patient utilization statistics. But the system did break down revenue by payer source, revealing that 40% of its net patient-service revenue came from Medicare and Medicaid. Those figures are much lower than UPHS' in-town competitor, Temple University Health System, which is the area's largest safety net provider.

Three high-profile hospitals anchor the academic medical center: 784-bed Hospital of the University of Pennsylvania, 455-bed Pennsylvania Hospital, and 331-bed Penn Presbyterian Medical Center.

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