Hospital margins rebound, new AHA data show

Despite financial pressures, hospital finances improve

New data from the American Hospital Association (AHA) suggests that hospitals have bounced back from the economic downturn, although they face continued pressures: inpatient procedures continue to transition to outpatient settings, and charity care and bad debt have hit record levels, Modern Healthcare's Beth Kutscher reports.

How not-for-profit hospitals survived the recession

New survey confirms outpatient shift

The numbers from AHA's latest annual Hospital Statistics guide—which contains data from fiscal year 2012—show that the nation's acute-care providers are increasingly delivering services to patients in an outpatient setting and in the ED:
  • Outpatient visits rose nearly 2.9% from 2011 to 2012, reaching almost 675 million visits in 2012. By comparison, year-over-year growth from 2010 to 2011 was just 0.7%.
  • ED visits increased by 2.9% from 2011 to 2012, compared with a 1.7% increase between 2010 and 2011.

At the same time, inpatient revenues have declined. Although inpatient beds per capita have remained unchanged—about 2.6 per 1,000 people—since 2009 and the average length of stay has held steady at 5.4 days, inpatient admissions declined by 1.2% from 2011 to 2012, following a 0.9% decrease from 2010 to 2011 and a 1.1% decrease from 2009 to 2010.

Meanwhile, the survey found that the level of uncompensated care continued to grow. In 2012, hospitals spent 6.1% of total expenses—a record $45.9 billion—on charity care and bad debt.

Hospitals adapt in volatile economic times

Despite pressure on the inpatient side of the business, the nation's hospitals reported $821.3 billion in net revenue in 2012, compared with $755.3 billion the year prior and $730.9 billion in 2010. Caroline Steinberg, AHA's vice president of health trends analysis, believes operating margins improved with the economy.

Meanwhile, hospitals mostly weathered fears that the challenging operating environment would lead many facilities to close their doors. Instead, the total number of hospitals remained fairly consistent year-over-year, and even rose slightly from 4,973 in 2011 to 4,999 in 2012. (In 2008. there were 5,010 hospitals across the United States.)

However, the report notes that financial pressures did encourage hospital consolidation. There were 3,100 facilities that were part of a larger system in 2012, up from 3,007 in 2011 and 2,868 in 2008.

The AHA survey also suggests that hospitals are contributing more to the nation's economy:

  • Acute-care providers employed 5.6 million people in 2012, 1.5% more than in 2011 and 800,000 more workers than 10 years earlier.
  • In mountain states, hospital employees comprise 3.3% of the workforce, while 5.1% of workers in New England work at medical facilities.

"The health care sector continues to grow and hospitals are a big part of that," Steinberg told Modern Healthcare. Hospitals are also trying to reinforce their nursing and technical staff in preparation for changes stemming from meaningful use and the implementation of ICD-10 coding sets.

Industry outlook

As the health care industry undergoes more change related to the Affordable Care Act, Steinberg predicts that the number of hospitals participating in the health insurance exchanges will rise. "We're still not seeing formation of insurance products," she says.

Hospitals worry about cost-sharing in ACA health plans

Steinberg notes that the survey uncovered evidence of steady growth in high-deductible health plans, which threatens to increase hospitals' bad debt if patients cannot afford their share of medical costs. "That will be a significant impact on hospitals," she warns (Kutscher, Modern Healthcare, 1/3 [subscription required]).

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