An article recently published in “Health Affairs” has identified that seven of the ten most profitable acute care hospitals in the United States are not-for-profit organizations. The data examined was retrieved from Medicare Cost Reports and Final Rule Data, and analysis considered the 2013 net income from patient care services per adjusted discharge.
According to the study, ” Forty-five percent of hospitals were profitable, with 2.5 percent earning more than $2,475 per adjusted discharge. The ten most profitable hospitals, seven of which were nonprofit, each earned more than $163 million in total profits from patient care services.” (Bai G. Anderson G.) Caring for patients was a net loss for 55% of hospitals in 2013. Roughly one-third of hospitals which earned a profit made between $1 and $1,000 per patient discharged. Only 12% of hospitals fared better, at $1,000+ per patient discharged.
Study co-author Ge Bai believes that it is important to understand which hospitals are profitable and to what extent they are affected by various public policies. Bai believes that it is up to the general public to monitor hospital consolidation, and to consider its impact on operating expenses and insurance negotiating power.
Mayor Laurel Prussing of Urbana, IL. discussed the phenomenon in an article published in the Associated Press. Urbana lost 11% of its assessed tax value, $6.5 million annualy, when the Carle Foundation Hospital in her city was no longer responsible for property taxes. “We need to question this whole idea of what not-for-profit means,” Prussing said. “This is a highly profitable business that manages to not pay taxes.”
Others aren’t so sure that losing money should be a prerequisite to earning nonprofit status. Danny Chun of the Illinois Hospital Association makes the case that increased spending power tends to directly benefit future patients and the community at large. He claims that income earned each year is reinvested in ” the latest technology, newer equipment, modern facilities, highly-trained staff and other programs that ensure access to quality health care services and benefit the health of their community.”
One thing is for sure: when hospital care makes up almost one-third of national health care spending, nearing $1 trillion, the debate about the relationship between nonprofit hospitals and profit margins will continue to be a hot topic.
Ge Bai, Gerard F. Anderson Health Aff May 2016 vol. 35 no. 5 889-897 doi: 10.1377/hlthaff.2015.1193
Johnson, Carla “Study: 7 of 10 most profitable US hospitals are nonprofits” Associated Press, May 2nd, 2016./sup>