Tower Health reported a smaller, $142 million operating loss for 2023 financial year

Tower Health this week reported a significantly smaller operating loss in the fiscal year that ended June 30, as the Berks County not-for-profit continued reshaping itself after steep losses during the pandemic.

The organization’s operating loss narrowed to $142 million from $212 million in fiscal 2022. Its revenue was basically flat for the year, at $2.17 billion, compared to $2.16 billion the year before, despite the sale of Chestnut Hill Hospital at the beginning of 2023.

Tower also reported that its cash reserves — which had fallen in every quarter since late 2000 — climbed to $208 million on June 30, an increase of $6 million since March 31. That meant the health system had 40 days of cash on hand, a key measure of how much money a health system has to pay expenses.

“We are not quite where we strive to be, but we have made amazing progress,” CEO P. Sue Perrotty said in an email to staff. “We are well on track to achieve our goal of returning to profitability by the end of the current fiscal year,” she added.

Tower employs 11,300 people and operates Reading, Pottstown, and Phoenixville Hospitals. It owns St. Christopher’s Hospital for Children in a joint venture with Drexel University.

The health system got into financial trouble after going into debt in 2017 to buy five financially struggling community hospitals in Southeastern Pennsylvania from Community Health Systems Inc. for $423 million. Tower has since closed two of those hospitals, Jennersville and Brandywine, in addition to the sale of Chestnut Hill.

After Tower’s exit, other health systems either bought or plan to buy the facilities. ChristianaCare, the largest health system in Delaware, bought Jennersville last summer for $8 million. The University of Pennsylvania Health System agreed recently to buy Brandywine Hospital, which is near Coatesville, as part of a tentative partnership with the U.S. Department of Veterans Affairs, which has an old facility nearby. That sale is expected to close in December, Tower said.

Tower has said it intends to operate within the smaller footprint of its remaining portfolio of hospitals in Reading, Phoenixville, and Pottstown. Reading, with 697 licensed beds, is by far the biggest. Pottstown has 213 beds, and Phoenixville has 144 beds.

While Tower said it has $6 million in positive cash flow in the last three months of fiscal 2023, its operating cash flow was negative $10 million for the full year. Still, that was a significant improvement over its $57 million cash loss in fiscal 2022.

Despite its improvements in financial performance, Tower still faces financial challenges. Its $1.2 billion in debt is huge for an organization its size, and for years, its businesses have not been generating enough cash flow to cover debt payments on its bonds and other types of debt. Those payments totaled $82 million in fiscal 2022.

That contributed to a $161 million year-over-year decrease in cash reserves, one-fifth of its $734 million in cash reserves three years ago.