Jun 26, 2019

Hospitals' profits cost patients billions

Hospital room with medical equipment

Photo: Shannon Fagan/Getty Images

Once you pull together Medicare, Medicaid and private insurance, hospitals end up with an average payment rate that's about 34% higher than what Medicare pays on its own, according to a report by the left-leaning Center for American Progress.

Why it matters: Hospitals are by far the biggest driver of U.S. health care spending, making hospital care a prime target for payment cuts — but the industry maintains that it couldn't survive solely on the rates government programs pay.

What they're saying: Those are the top-line numbers for hospitals overall. CAP also broke out a group limited to acute care hospitals.

  • Among those facilities, total profit was $63.6 billion, suggesting that "stronger rate regulation could save Americans tens of billions of dollars on hospital expenditures, even if rates were tailored to keep afloat loss-making hospitals that are crucial to patient access," CAP's Emily Gee writes.

By the numbers: The acute care hospitals included in the analysis had a 7% total profit margin, on average, in 2016 — less than drug companies' margins but greater than insurers'.

  • Hospital margins have increased over the last decade.

Yes, but: Not all hospitals are the same.

  • For-profit hospitals had an average total margin of 11%, nonprofit hospitals had a 7% margin, and public hospitals had a 5% margin.
  • About a quarter of hospitals lost money in 2016, including 40% of public hospitals.

Go deeper: Hospitals' prices keep going up

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