Tower Health Reports $16 Million Operating Loss Amidst Leadership Transition and Shifting Patient Trends
Tower Health reported a $16.1 million operating loss for the first six months of fiscal year 2026, a period ending December 31, 2025. The results highlight ongoing financial headwinds for the West Reading-based nonprofit health system as it navigates a critical leadership change and evolving patient utilization patterns. While the system managed to grow its overall revenue, rising costs and a decline in inpatient volume contributed to the continued deficit.
Deep Search: Financial & Operational Breakdown
A closer examination of the financial filing reveals a mixed performance across the system’s assets. Total revenue for the six-month period rose to $988.6 million, a 3.4% increase compared to the $956 million reported in the same period of fiscal 2025. However, this growth was unevenly distributed. Phoenixville Hospital emerged as a strong performer with a 9% revenue increase, and the flagship Reading Hospital posted a 3% gain. Conversely, Pottstown Hospital struggled, recording a 7% decline in revenue.
Operational metrics indicate a broader industry shift away from traditional hospital stays. Tower Health saw a 2.9% drop in inpatient admissions across its 1,060-bed network and a 2.7% decrease in emergency department visits, which totaled 81,245. Liquidity remains a concern for investors; cash reserves dipped to $205 million as of December 31, down from $220 million just three months earlier. This leaves the system with approximately 39 days of cash on hand, a metric that trails significantly behind the industry benchmark where many robust health systems maintain over 200 days of liquidity.
Objections: Signs of Stability Underlying the Loss
Despite the headline loss, proponents of the system’s turnaround strategy point to underlying improvements. The $16.1 million loss is technically an improvement—albeit a slim one—over the $16.6 million operating loss recorded during the same period the previous year. Furthermore, the prior year’s results were buoyed by a one-time $19.5 million gain from a 340B drug pricing settlement; without that non-recurring windfall, the previous year’s operational deficit would have been significantly deeper, approximately $36 million.
Additionally, the decline in inpatient volume is partially offset by strong growth in outpatient surgeries. This aligns with national healthcare trends prioritizing ambulatory care, suggesting Tower Health is successfully capturing volume in high-demand service lines even as bed utilization drops. The revenue growth at Phoenixville and Reading also suggests that core markets remain stable despite challenges in other areas.
Background: A System in Transition
This financial report marks the final chapter for retiring CEO P. Sue Perrotty, who took the helm during a period of severe financial distress. Perrotty is credited with stabilizing the organization after it faced massive losses following an aggressive expansion strategy that included the acquisition of several Philadelphia-area hospitals—some of which, like Brandywine and Jennersville, were subsequently closed or sold.
Perrotty will be succeeded by Michael Stern, the system’s current Chief Operating Officer, on February 23, 2026. Stern inherits a system that achieved a narrow annual operating profit in fiscal 2025—its first in years—largely due to asset sales. His tenure will begin with the immediate challenge of rebuilding cash reserves and addressing the underperformance at Pottstown Hospital while managing a debt load that continues to pressure the organization’s credit rating.
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