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What's the breakdown of revenues and margins/profits for hospitals?
Hello! Thanks for your question about the breakdown of revenues and margins/profits for hospitals. The short version is that patient revenue is how for-profit health system makes money and salaries, wages, and benefits are the largest expense category. Congressional policy and laws such as the ACA impact a hospital's profit margin along with the concentration of competition. Below you will find a deep dive of my findings.
METHODOLOGY
To answer the question, I looked at the overarching hospital industry including where and how many is spent and where hospitals make money. Then I wanted to dive further into actual data for health systems. As examining every health system in the U.S. is beyond the scope of this Wonder request, I chose to focus on the profit and spending breakdown of the 10 largest for-profit health systems in the U.S. Becker's Hospital Review assembled a list of the 10 largest for-profit health systems based on the number of staffed acute care beds.
RESULTS
MONEY FLOW
On a national level, there are several economic and social factors that impact hospital revenues. One of these major factors, butt which indirectly impacts revenues, are Congressional policy changes. For instance, the passage of the Patient Protection and Affordable Care Act (ACA) in 2010 resulted in decreased revenues for many health systems. In the U.S. healthcare spending has increased due to an aging population along with high drug and prescription medication prices. Profit margins for health systems are also determined by the concentration of hospitals in the area. If there are fewer competitors in the area, profit margins for the existing health systems are automatically higher due to the lack of robust competition. Finally, a health system's revenues are also influenced by the services provided. The more specialized services (such as cardiac) demand a higher profit margin.
Like revenue, expenses are also impacted by Congressional policy changes. Hospitals and health systems are spending increased amounts on value-based care (ACA) and updating patient records to electronic formats. 3 other major areas where health systems are spending money are health IT, facility improvements and imaging equipment. The cost of wages, medication, and insurance also impact the health system's ability to provide care and expenses. Finally, the cost of high-quality medical devices and items like artificial limbs contribute to the health systems expenses total.
MONEY BREAKDOWN
In this spreadsheet, I have listed the health system, total revenue, and expenses (by year) and then listed the largest expense and revenue categories.
AREAS FOR FURTHER RESEARCH
For this Wonder request, I chose to only focus on for-profit health systems when highlighting spending and profit breakdowns. To gain a complete picture of the health systems' profit and spending cycles, further research could be conducted into the numbers non-profit health systems report and then compare those numbers to for-profit systems. This list of the top 25 non-profit health systems by the number of hospitals would be a good starting place.
CONCLUSION
To wrap it up, patient revenue is how for-profit health system makes money and salaries, wages, and benefits are the largest expense category. Congressional policy and laws such as the ACA impact a hospital's profit margin along with the concentration of competition in the area. Thanks for using Wonder! Please let us know if we can help with anything else!