The Philadelphia-region’s nonprofit health systems: a recap of fiscal 2023 financial results

Philadelphia-area nonprofit health systems have started reporting their financial results for the summer months, so it’s a good time to recap the year that ended June 30, when every health system in Southeastern Pennsylvania — except for the University of Pennsylvania Health System — either lost money or barely scraped by.

Five of the nine systems reported worse results in fiscal 2023 than the year before, though drawing comparisons raises issues at times. At Jefferson, for example, operating results benefited from the sales of businesses in both years: $153 million in fiscal 2023 and $31.7 million in fiscal 2022.

In August, when Jefferson released unaudited financial results, it also emphasized that special governmental funding for COVID-19 fell to $48.6 million in fiscal 2023 from $153 million the year before.

Jefferson said that its operating results, adjusted to take these items into account, improved to a $280.1 million loss from a $316.8 million loss.

Another factor distinguishing Jefferson’s audited results from its regional competitors: It reports as an institution of higher education, and therefore includes investment income in operating revenue. Health systems report that as nonoperating income. Credit ratings agencies Moody’s Investors Service and Standard & Poor’s Global Ratings subtract that income out of Jefferson’s operating results for their assessments of its financial health.

Counting investment income as part of operating revenue boosts Jefferson’s results relative to Temple University Health System and the University of Pennsylvania Health System. The accounting method added $163.9 million to Jefferson’s operating income in fiscal 2023 and $88.6 million the year before.

Penn Medicine’s results and its balance sheet are not as strong as they were before the pandemic, but it still received welcome news last month when Moody’s and S&P affirmed the system’s ‘AA’ rating and maintained their stable outlooks on the organization.

The ratings agencies also adjust Penn’s financial results, but for a different reason than in Jefferson’s case.

Moody’s and S&P include payments to the University of Pennsylvania’s Perelman School of Medicine in operating expenses. S&P subtracted $171 million from the health system’s operating profit to account for those transfers in its recent report.

That reduced Penn’s operating margin by 2%, S&P said.