Aggregate hospital industry profits jumped nearly 25% in 1996 to more than $21 billion, new data from the American Hospital Association reveal.
That dollar figure and the 6.7% profit margin it represents are industry records.
The banner results contradict other financial indicators and hospital industry rhetoric that suggested times were and are tough for hospitals.
In a separate report released last year, the AHA said hospitals' overall profitability was unchanged in 1996, and hospitals, in fact, lost money on direct patient-care services. Even data from the U.S. Labor Department regarding hospital industry revenues suggested that 1996 was an off year. Those two reports are based on smaller sample sizes of hospitals.
The new AHA figures, based on data from all acute-care hospitals, suggest otherwise.
Fueled by a 4% increase in total revenues to $315 billion, acute-care hospitals turned a $21.3 billion profit in 1996. Expenses rose just 2.9%.
The hospital industry's net income represents a 24.7% increase in aggregate profits over 1995's total of about $17 billion. And the industry's 6.7% profit margin is more than one percentage point higher than the previous record of 5.6% recorded a year earlier (See chart).
The AHA's figures are based on financial data reported to the Chicago-based association by the 5,134 acute-care hospitals in operation in 1996. The figures are included in the AHA's annual Hospital Statistics report, which was published last week.
Some 3,045, or nearly 60%, of the hospitals were private, not-for-profit institutions; 1,330, or 26%, were public, not-for-profits; and 759, or 15%, were for-profit.
The report reveals that hospitals' envious balance sheet was the result of continuing growth in patient-care revenues.
Hospitals' net patient revenues rose 4% to $290.9 billion in 1996.
Inpatient admissions rose slightly to 31.1 million in 1996 from 31 million the previous year. The average hospital stay dropped to 6.2 days from 6.5 days. Outpatient visits grew 6% to 439.9 million.
The findings rebut the hospital industry's contention that patient-care services are at best a break-even proposition and that hospitals are relying heavily on investment income.
The AHA in a report released last year said hospitals lost money on patient care in 1996, posting a -0.8% net patient margin. That report, the association's quarterly hospital economic report, is based on a monthly survey of about 2,000 hospitals.
Even the U.S. Labor Department underestimated hospitals' revenue growth. Its Producer Price Index, which measures increases in wholesale prices, said hospitals' net revenues rose just 1.4% in 1996. The department's data are based on figures from about 400 hospitals.
As for 1997, the AHA's latest quarterly economic report said hospitals' total profit margin through the first six months dipped to 5.3% from 5.5%. Hospitals' net patient margin dropped to -0.6% from -0.2%.