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Banner Health's academic medical center in Phoenix. Photo: Banner Health

The number of hospital admissions, surgeries and other medical procedures has continued to stay flat in many parts of the country, but that hasn't prevented hospitals from retaining large sums of money and hiring more people.

The big picture: America's rural hospitals are dying. But large not-for-profit hospital systems in cities and suburbs are doing extremely well as premiums rise and as patients struggle to afford their medical bills.

Details: Axios analyzed the financial statements of 31 prominent not-for-profit hospital systems for the first 3 months of 2019.

  • This sample collectively generated $68.5 billion of revenue in the first quarter of this year. That's $274 billion annualized, or more than one-fifth of all hospital spending.
  • The combined operating margin was 5.1%, compared with 4.5% in the first quarter of 2018.
  • The combined net margin (after factoring in investment income) was 16.4%, a large jump from 5.5% in 2018.
  • These margins are on par with some pharmaceutical and medical device companies, and well above the margins for insurers and drug distributors.

Between the lines: Hospitals are feasting on bigger investment returns, boosted by the stock market's run, but they also are profiting more from commercial and public health insurer payments.

The intrigue: Not-for-profit hospitals don't pay taxes and don't have "shareholders" like publicly traded companies, so they are required to reinvest any surplus cash into their communities.

Case in point: Newly opened patient towers at Banner Health's academic medical center campuses in Arizona cost $1 billion and "are expected to drive additional volume increases," Banner said in a memo last week to bondholders. Banner declined an interview request.

  • "It's clear the hospital industry today continues to be driven by volume, which is where the big returns are," said Paul Ginsburg, director of the USC-Brookings Schaeffer Initiative for Health Policy. "Value-based [payment] approaches conflict with that."

Go deeper: Hospitals are making a fortune on Wall Street

Go deeper

10 hours ago - World

Maximum pressure campaign escalates with Fakhrizadeh killing

Photo: Fars News Agency via AP

The assassination of Mohsen Fakhrizadeh, the architect of Iran’s military nuclear program, is a new height in the maximum pressure campaign led by the Trump administration and the Netanyahu government against Iran.

Why it matters: It exceeds the capture of the Iranian nuclear archives by the Mossad, and the sabotage in the advanced centrifuge facility in Natanz.

Scoop: Biden weighs retired General Lloyd Austin for Pentagon chief

Lloyd Austin testifying before Congress in 2015. Photo: Chip Somodevilla/Getty Images

Joe Biden is considering retired four-star General Lloyd Austin as his nominee for defense secretary, adding him to a shortlist that includes Jeh Johnson, Tammy Duckworth and Michele Flournoy, two sources with direct knowledge of the decision-making tell Axios.

Why it matters: A nominee for Pentagon chief was noticeably absent when the president-elect rolled out his national security team Tuesday. Flournoy had been widely seen as the likely pick, but Axios is told other factors — race, experience, Biden's comfort level — have come into play.

Updated 12 hours ago - Politics & Policy

Coronavirus dashboard

Illustration: Sarah Grillo/Axios

  1. Health: WHO: AstraZeneca vaccine must be evaluated on "more than a press release."
  2. Politics: Supreme Court backs religious groups on New York COVID restrictions.
  3. World: Thailand, Philippines sign deal with AstraZeneca for vaccine.
  4. Economy: Safety nets to disappear in December Black Friday shopping across the U.S., in photosAmazon hires 1,400 workers a day throughout pandemic.
  5. Education: National standardized tests delayed until 2022.