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Butler Health System losses expected to persist into 2026

Butler Memorial Hospital Morgan Phillips/Butler Eagle

A new financial forecast from the Independence Health System indicates it no longer expects one of its component entities — the Butler Health System — to reverse its financial losses until 2026, at the earliest. These forecasts were released during a presentation to bondholders by executives of Independence Health on Thursday morning, June 13.

The new forecasts anticipate Butler Health System will sustain an operating loss of $28.5 million in the 2024 fiscal year, followed by $15.1 million in the 2025 fiscal year and $14.36 million in the 2026 fiscal year.

As with most of the health care industry in the post-COVID era, Butler Health System is still dealing with financial pressures as reimbursements from insurance providers remain stagnant, but expenses and labor costs rise. As a result, the system is reporting a $4.9 million budget shortfall through April 2024.

Ongoing negotiations with vendors and insurance payers have delayed Butler Health System from realizing about $3.7 million worth of expected cost savings.

Tom Albanesi, Independence Health CFO, said the organization recently renewed its managed-care contracts with its three largest insurers, at improved rates. Albanesi said the new contracts will translate to an increase of $16 million in revenue in the first year.

Butler Health System also is in the midst of a wide-ranging Financial Improvement Plan developed last year by Washington, D.C.-based FTI Consulting.

The health system and the consulting firm said during the presentation they have identified enough initiatives to create $81.5 million in positive financial impact over the next few years, although the full impact of the plan is not expected to bear out until the 2027 fiscal year. The improvement plan is expected to create $35 million in savings for the 2024 fiscal year.

Although Butler Health System merged with Westmoreland County-based Excela Health at the start of 2023 to form Independence Health, both components still file separate financial reports.

Butler Memorial Hospital as seen on May 15. Morgan Phillips/Butler Eagle
Butler Memorial Hospital as seen on May 15. Morgan Phillips/Butler Eagle

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