Hospital profit margins hit their highest level last year since the mid-1980s, according to American Hospital Association figures released last week.
The report adds to the growing body of evidence that the financial health of the hospital industry has grown considerably stronger over the past several years despite alleged Medicare and Medicaid payment shortfalls, high uncompensated-care loads and fixed or discounted payments from an increasing number of payers.
The report also comes at a time when the AHA is telling Washington lawmakers that proposed reductions in budgeted Medicare spending to help fund national healthcare reform could lead to hospital staffing cuts, service reductions and possible closures.
In fact, yearly aggregate hospital profits rose more than 18% to nearly $12 billion in 1992, the AHA data reveal (Dec. 6, 1993, p. 2). That followed a 23% increase in profits in 1991. And, the number of annual hospital closings, which the AHA previously used as a barometer of the industry's health, dropped for the fifth consecutive year last year, hitting a 10-year low of 34 shuttered facilities (March 28, p. 3).
Last year, hospitals' total profit margin hit 5.5%, the AHA said last week. That's the highest total profit margin since 1985, when hospitals posted a 5.9% total profit margin.
At the same time, hospitals posted a 0.5% operating profit margin, the AHA said. That's the highest operating profit margin since 1986, when hospitals enjoyed a 0.7% profit.
The AHA's figures, released in its quarterly hospital economic report, are based on a monthly survey of a representative sample of 2,000 hospitals.
Increased hospital profitability was based on a 7.4% increase in aggregate hospital revenues last year, compared with a 7.1% rise in expenses. In 1992, revenues and expenses rose at the same pace-9.1%, the AHA said.
In its report, the AHA called the margin data "stable," and the association said, "Individual hospital circumstances vary, and margins can be fragile." The AHA also downplayed the significance of the margin figures themselves, stating that, "Experience has shown that hospital interim, monthly estimates of net revenues tend to overstate patient margins."
Hospitals also enjoyed an increase in inpatient and outpatient business last year, the AHA report said. Total admissions grew 1.0% in 1993, compared with a 1.1% decline in 1992. Outpatient visits, meanwhile, jumped 6.8% last year, compared with a 6.1% increase in 1992.
Hospitals' overall occupancy rate dipped to 61.4% last year, compared with a 62.2% occupancy rate in 1992, the AHA said.