The Daily Item, Sunbury, PA

The Danville News

May 2, 2014

Geisinger expects $50 million in lost profits

DANVILLE — Due to changes in federal laws affecting Medicare and Medicare Advantage programs, Geisinger Health System is anticipating a $50 million decline in operating margin for 2015.

“The slope of revenue growth is slowing,” said Kevin Brennan, executive vice president of finance and chief financial officer of Geisinger Health System. “While we’re treating more and more people in the communities and our market share is increasing, the revenue per yield, per person growth rate, has slowed at a time where we have not seen a corresponding slowdown in expenses.”

For its 2013 fiscal year, Geisinger reported an operating margin of $137.9 million.

The change comes as a result of reform legislation from the Affordable Care Act, according to Geisinger spokesperson Mike Ferlazzo. Ferlazzo said because the changes are part of a federal program healthcare systems across the country will all assess how the Affordable Care Act will affect their operations, much as Geisinger is currently doing.

For Geisinger’s clients and patients, this means health plans offered by Geisinger will need to be reevaluated and reexamined to see what changes can be offered come Jan. 1, 2015, Brennan said.

Such federal changes are not uncommon, Brennan said.

At the start of 2013, the automatic spending cuts caused by the federal government sequestration cost Geisinger $25 million in operating margin, which has not yet been reversed.

“This most recent Medicare Advantage reduction is just on top of all these other challenges,” Brennan said. “Our overall expenses are going up faster than our revenue.”

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