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March 17, 2020
David Burda
Economics Policy System Dynamics

Hospitals at the Margins

Almost every hospital or health system that I’ve covered over the past 37 years as a healthcare business reporter claims to be failing financially or on the brink of financial collapse. It’s as if admitting that you’re running a successful business is the kiss of death. 

That’s why every spring I welcome the Medicare Payment Advisory Commission’s annual March report to Congress. It’s about the most objective account of hospitals’ true financial situation as you can find. 

In the spirit of objectivity, here are 10 data points from MedPAC’s March 2020 report served up with no comment from me: 

  • 63.3%. That was hospitals’ average occupancy rate in 2018, up slightly from 62.5 percent in 2017
  • $25 Billion. That’s how much hospitals spent on construction in 2018, a little less than the $26 billion they spent in 2017
  • 46. That’s how many hospitals closed inpatient operations in 2019, double the 23 than did so in 2017
  • 11. That’s how many hospitals opened inpatient operations in 2019, one less than did so in 2017
  • 6.8%. That was hospitals’ aggregate all-payer total profit margin in 2018, down slightly from the all-time high of 7.1 percent in 2017
  • 6.1%. That was hospitals’ aggregate all-payer operating profit margin in 2018, up slightly from 5.9 percent in 2017
  • 11.3%. That was the aggregate all-payer total profit margin at for-profit hospitals in 2018, which was an all-time high
  • 6.4%. That was the aggregate all-payer total profit margin at not-for-profit hospitals in 2018
  • -9.3%. That was hospitals’ overall Medicare profit margin in 2018 compared with -9.9 percent in 2017
  • -2.0%. That was the median overall Medicare profit margin at efficient hospitals n 2018 

The numbers tell me a story. They tell me that no matter what Medicare or anybody else throws at them, the people who run the nation’s hospitals and health systems can figure out a way to make money. Even when more than a third of their beds are empty. 

In its 2020 outlook for not-for-profit hospitals and health systems, S&P Global Ratings noted “management strength” as one of the sector’s strategic assets for this year.

“Management teams continue to demonstrate ability to respond to industry changes,” the ratings agency said. (To be fair, the agency wrote its report before the COVID-19 outbreak in the U.S.)

To learn more about how hospital and health system leaders are responding to the new healthcare economy, please read “Unrelenting Margin Pressures: Overcoming Healthcare’s Softening Revenues and Rising Expenses on 4sighthealth.com.

If you want, you can download MedPAC’s 563-page March report here

What story does it tell you?

Thanks for reading.

About the Author

David Burda

David Burda began covering healthcare in 1983 and hasn’t stopped since. Dave writes this monthly column “Burda on Healthcare,” contributes weekly blog posts, manages our weekly newsletter 4sight Friday, and hosts our weekly Roundup podcast. Dave believes that healthcare is a business like any other business, and customers — patients — are king. If you do what’s right for patients, good business results will follow.

Dave’s personnel experiences with the healthcare system both as a patient and family caregiver have shaped his point of view. It’s also been shaped by covering the industry for 40 years as a reporter and editor. He worked at Modern Healthcare for 25 years, the last 11 as editor.

Prior to Modern Healthcare, he did stints at the American Medical Record Association (now AHIMA) and the American Hospital Association. After Modern Healthcare, he wrote a monthly column for Twin Cities Business explaining healthcare trends to a business audience, and he developed and executed content marketing plans for leading healthcare corporations as the editorial director for healthcare strategies at MSP Communications.

When he’s not reading and writing about healthcare, Dave spends his time riding the trails of DuPage County, IL, on his bike, tending his vegetable garden and daydreaming about being a lobster fisherman in Maine. He lives in Wheaton, IL, with his lovely wife of 40 years and his three children, none of whom want to be journalists or lobster fishermen.

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