Penn Medicine had steady financial results in first half of fiscal 2024

The University of Pennsylvania Health System reported a small increase in profitability in the six months ended Dec. 31 compared to the year before.

The nonprofit health system, anchored by the 1,200-bed Hospital of the University of Pennsylvania, had operating profits of $117.4 million in the first half of fiscal 2024, which amounts to an operating margin of 2.2% on $5.3 billion in total revenue.

The year before, Penn’s operating margin was $103.6 million, or 2.1% of $4.9 billion in total revenue in the first six months of the financial year.

“It’s a more stable environment we’re in than it was 18 months ago,” the health system’s chief financial officer, Keith Kasper, said in an interview Monday. “We’re growing on the revenue side. Our profitability is a little better, still not where we were pre-pandemic.”

In the three years before the pandemic, Penn’s average operating profit margin approached 6%, according to an Inquirer review of its audited financial statements.

Kasper said the cost of contract labor remains a key focus, as well as overtime and premiums paid to employees for taking extra shifts. Those costs are “grudgingly declining,” he said, but still not back to pre-pandemic levels.

“That’s still a drag on our margin,” he said.

Employee benefit cost increases are also notable, said Kasper, citing new weight loss drugs used by employees and an uptick in the general employee health care usage.

“There’s a lot more pressure there than there had been in previous years,” he said.