The Medicare Payment Advisory Commission (MedPAC) data released for 2017 shows hospitals' Medicare margins declining to their lowest levels in ten years. However, hospitals' all-payer margins (including Medicare) continued their upward climb. MedPAC is an independent US federal body established by the Balanced Budget Act of 1997 and based in Washington, D.C. Its mandate is to advise the US Congress on payments to private health plans participating in Medicare and health providers serving Medicare beneficiaries as well as to evaluate beneficiary's access to care and the quality of care received.
Not-for-profit hospitals has negative margins of -11% and was -9.7 for all 6210 hospitals. Similarly, urban hospitals had margins of -10% whereas rural hospitals were only -5.9% due to the boost in reimbursement for rural hospitals enacted previously.
Despite this, the hospitals continued to be ‘profitable’ (revenue over expenses) with aggregate all payer margins going from 6.4% in 2016 to 7.1% in 2017. Operating margins (Operating Margin = Operating Earnings / Revenue) stayed about the same at 5.9%.
What is not surprising is the rate of growth of the out-patient business. “The American Hospital Association's 2019 Hospital Statistics report showed hospitals' net outpatient revenue was $472 billion and inpatient revenue totaled nearly $498 billion in 2017, the latest year for which the report covers, creating a ratio of 95%, up from 83% in 2013.”
Interesting though that there were some (including myself) who thought that the number of hospitals in the US would decrease. Not so. There are 9% more hospitals now than 10 years ago (6210 versus 5708).