Tower Health’s cash reserves fell by $167 million since last June, as losses continued

Tower Health’s finances took another turn for the worse in the nine months through March, as the not-for-profit health system continued losing money and burning through cash reserves.

Tower’s cash reserves had dwindled to $202 million on March 31, down 45%, from the end of last June. That left the Berks County organization, anchored by Reading Hospital, with just 39 days of cash on hand, Tower reported Friday. Days of cash on hand is a common measure of financial strength and stability.

That’s concerning, particularly how quickly that sharp decline happened, said Kevin Holleran, who heads the Fitch Ratings’ group that rates municipal bond debt issued by not-for-profit health care and higher education institutions.

Tower officials said they saw positive trends despite the system’s persistent financial difficulties, which grew out of its debt-fueled expansion six years ago into the Philadelphia market.

“Our financial performance in March was the third best month for the health system since June 2020, as patient volumes rebounded while net hiring growth and significantly lower turnover reduced the use of contract labor,” Tower said in a statement.

But one good month could not make up for significant declines in patients for the nine-month period.

Even excluding two hospitals that were closed in fiscal 2022, Tower said inpatient admissions were down 7.9%, and emergency department visits were off by 13.3%.

Inpatient surgeries fell 10.9%, while outpatient surgeries dropped 10.3%, Tower said. Those figures include Chestnut Hill Hospital, which Tower sold on Jan. 1 for $28 million.

In addition to Reading Hospital, Tower owns Phoenixville and Pottstown Hospitals. It closed Brandywine and Jennersville Hospitals, both in Chester County. Tower in 2017 paid $423 million for Brandywine, Chestnut Hill, Jennersville, Phoenixville, and Pottstown Hospitals.

Tower reported $1.62 billion in revenue for the first nine months of fiscal 2023, down slightly from $1.66 billion a year go. Its operating loss was $127 million, compared to $137 million.

In a reporting change, Tower did not disclose individual results for Philadelphia’s St. Christopher’s Hospital for Children, which it owns in a 50-50 joint venture with Drexel University.

Tower said it decided to account for St. Chris the same way it does other joint ventures, such as a 144-bed psychiatric hospital it owns jointly with Acadia Healthcare. Tower owns a third of that facility.