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A hospital owned by Sentara Healthcare. Photo: John Greim/LightRocket via Getty Images

Not-for-profit hospital systems are starting to disclose second-quarter financial documents, and the industry's dominant players are having no problem making money.

The bottom line: The number of people staying overnight in a hospital isn't really going up, but that has not affected the profitability of hospital systems — especially those with a lot of brand and market power.

By the numbers: Axios reviewed the financial statements of 16 not-for-profit hospital systems that operate on a calendar fiscal year and hold a lot of power in their regional markets. All of the documents were disclosed within the past week.

  • Similar to the first quarter, most systems posted lower overall surpluses in the first six months of this year because their Wall Street investments have performed worse in 2018 than they did during the booming market of 2017.
  • However, hospital operating margins — which reflect the money that hospitals keep after paying their employees and after paying for routine expenses like drugs and medical equipment — held steady at around 4%.
  • Operating margins were higher, year over year, for more than half of the systems.
  • Sentara Healthcare, which owns hospitals and a health plan in Virginia, had the highest operating margin at 9.1%.

Between the lines: In return for huge tax breaks, not-for-profit hospitals are supposed to reinvest their surplus money into the community. However, that often takes the shape of new buildings and other high-cost projects with the intent of increasing revenue.

  • One example: "The increase in revenue from surgical ventures was attributable to the addition of five new surgical centers in the latter half of 2017 and an additional center in May 2018," executives at RWJ Barnabas Health, a system in New Jersey that was created through mergers, said in a report to bondholders last week.

Reality check: The consolidating industry has given big systems even more power to charge commercial health insurers what they want, and American hospitals' fixed costs are unusually high.

  • However, within the entire health care sector, pharmaceutical companies remain the most profitable, on average.

Go deeper

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Patrick Gaspard speaks onstage at the 2020 Sundance Film Festival. Photo: Ernesto Distefano/Getty Images

Patrick Gaspard, who served as ambassador to South Africa under President Barack Obama, is stepping down as president of George Soros' Open Society Foundations, fueling speculation that he'll join the Biden administration, potentially as Labor secretary.

What to know: Before his stint as ambassador, Gaspard was Obama's political director in the White House, drawing upon his experience in the labor movement to advance Obama's legislative agenda on health care and financial services reform.

House passes bill to decriminalize marijuana

Rep. Earl Blumenauer (D-Ore.), a longtime marijuana legalization advocate and co-sponsor of the bill. Photo: Pete Marovich For The Washington Post via Getty Images

The House on Friday voted 228-164 in favor of the Marijuana Opportunity Reinvestment and Expungement (MORE) Act, marking the first time a congressional chamber has voted in favor of decriminalizing marijuana at the federal level.

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Illustration: Aïda Amer/Axios

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