Let's see. There are fewer hospitals, but in aggregate, they are making more money. For-profit hospitals are making up a larger share of all hospitals. Coincidence?
There is a subtle but important change taking place in the hospital landscape that healthcare policymakers, hospital executives and industry lobbyists would be wise to note. Slowly but surely, the number of investor-owned hospitals is rising while the number of not-for-profit hospitals is declining. Depending on your point of view, that's either a good thing or a very, very bad thing.
Here are the figures, according to the latest available data from the American Hospital Association:
* Overall, the number of general acute-care hospitals dropped to 4,895 last year from 4,927 in 2002.
* The number of private not-for-profit hospitals dropped to 2,984 last year from 3,025 in 2002.
* The number of public, or government-owned, not-for-profit hospitals fell to 1,121 last year from 1,136 in 2002.
* The number of for-profit hospitals rose to 790 last year from 766 in 2002 and now represent 16% of all general acute-care hospitals.
* Hospitals' aggregate profits rose 17% to $22.6 billion last year from $19.3 billion in 2002. Their aggregate profit margin rose to 4.8% last year from 4.4% in 2002.
Hospital profitability in terms of dollars was the highest ever measured by the AHA, and for-profit ownership in terms of percentage of all hospitals was the highest ever measured by the AHA. So, to answer the rhetorical question in the first paragraph of this editorial, I think not. All hospitals, regardless of ownership status, are driven to make a profit. However, the drive to make a profit at investor-owned hospitals is higher because of their ownership status. As for-profits make up a larger share of the overall pie, overall hospital profitability should go up. And it did.
To most policymakers, employers and patients, a hospital is a hospital. Only the sophisticated make note of ownership differences. If the current trend continues, those differences may become invisible even to the sophisticated, with only health-services researchers and healthcare journalists caring that acute-care facilities come in different tax codes.
Consequently, the not-for-profit hospital sector has a big challenge ahead of it, and that's to convince policymakers, employers and patients that not-for-profit hospitals, both public and private, are special. The best way to do that is to act special. As events of this year will attest, acting special hasn't always come easy for some not-for-profit hospitals and their chief executives. Exorbitant salaries, lucrative appointments to vendor boards, nasty debt-collection practices and pricing-gouging scandals unfortunately have painted the sector with the same broad brush in the minds of the public. Lost behind the headlines are the community benefits that only not-for-profit hospitals can provide to the sick and poor.
The need to act special will become even more important as the for-profit hospital sector continues to grow and drive up the overall profitability of the entire universe of hospitals. Higher aggregate profitability will mask ownership differences and hide the true range of financial health of individual hospitals and hospital ownership types. Payers, including Medicare, may be less inclined to increase payment rates for all because "all" are doing much better. The AHA represents all hospitals, which makes it difficult for the association to release financial results by hospital ownership type lest it alienate a particular group of its dues-paying members. But if the AHA really wants to help the hospitals that need it most, it may be time to tell us who's making money and who's not.
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