Geisinger merger unrelated to loss

Officials say the $10.5 million loss during the past four months is not connected to the merger between the University's Hershey Medical Center and Geisinger Health System.

Medicine doesn't come cheap.

Some health systems in the country are learning that lesson as several managed health care systems have reported significant losses in the past year.

The Penn State Geisinger Health System reported a $10.5 million loss in the past four months, according to an article by The Associated Press Saturday.

The system was officially created July 1 with the merger of the University's Hershey Medical Center and the Geisinger Health System, but the losses are not due to the merger, said Dr. C. McCollister Evarts, senior vice president for health affairs at the University.

"We would have been behind whether there was a merger or not," Evarts said.

Officials from Geisinger also said the merger is not responsible for the losses.

"The merger is moving ahead positively and it makes us a stronger and more viable organization than either one would have been had we remained separate," said Frank Trembulak, the system's executive vice president and chief operating officer, in a news release from the system.

He added that the system did have some one-time losses last year during the merger, but those were not long-term costs.

Increased costs of medicine and supplies, less reimbursement and greater discounts for services and inflation have contributed to the losses occurring throughout the nation in managed health care, Evarts said.

"There are current trends in the health care industry, and those trends point toward the fact that there would be operating losses this year," he said.

Those trends are a symptom of the initially low rates Health Maintenance Organizations used to attract customers a few years ago, said Steve Foreman, assistant professor in health policy administration. Although the costs of health care have leveled off in the past few years, Foreman said, there are not enough customers to keep them that low.

"Now it's coming back to haunt them," he said. "Underdemand increases prices."

The losses are not reflective of the doctors, hospitals or the merger, he added.

The system will focus on reducing costs by spending on buildings and equipment unless absolutely necessary. It will also limit hiring to only those involved with patient care, according to the news release.

No personnel will be fired, Evarts said, and patient care should be unaffected by the reduction in costs.

"Our mission is to provide quality care for our patients and we cannot compromise that," Evarts said.