January 9, 2018

Community hospital profits rose in 2016—but so did uncompensated care, report finds

Daily Briefing

    Profits at community hospitals throughout the United States continued to rise in 2016, according to an American Hospital Association (AHA) report released Thursday.

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    AHA report

    AHA's annual Hospital Statistics report is based on data from all 4,840 registered community hospitals in the United States. AHA in its latest report changed how it represents uncompensated care by no longer including it as a percentage of the community hospitals' expenses.

    According to the report, the profits of more than 4,800 U.S. community hospitals in 2016 reached a total of $76.1 billion—up from $73.3 billion in 2015 and representing a 43% increase since 2011. The report found that the hospitals' total net revenue in 2016 reached $979 billion, while their expenses totaled $903 billion.

    In addition, the report found that community hospitals' total uncompensated care—which included free, discounted, and unpaid care—increased from $35.7 billion in 2015 to $38.3 billion in 2016. As a share of total expenses, uncompensated care remained steady at 4.2% between 2015 and 2016, following a substantial decline after the Affordable Care Act's coverage expansions in 2014, Modern Healthcare reports.

    Ashley Thompson, SVP for policy analysis at AHA, said total uncompensated care likely rose for community hospitals in 2016 because more patients enrolled in high-deductible health plans and could not afford to pay their hospital bills.

    Further, the report showed that inpatient admissions at community hospitals, including nursing home units, in 2016 rose slightly to 33.4 million—which is about 164,000 more inpatient admissions than in 2015 and 358,000 more inpatient admissions than in 2014. The uptick in inpatient admissions marks a reversal from 2011 to 2014 when such admissions experienced about a 5% decline.

    Meanwhile, outpatient visits among community hospitals have grown consistently since 2011, Modern Healthcare reports. According to the report, community hospitals in 2016 recorded 747 million outpatient visits, representing a 12% increase from 2011. 

    Discussion

    Mary Crossley, a professor at the University of Pittsburgh School of Law, said the dip in inpatient admissions is likely linked to the implementation of government programs designed to penalize hospitals for unnecessary admissions. Certain hospitals have learned how to avoid such penalties by better managing admission practices, Crossley said.

    Brock Slabach, SVP of the National Rural Health Association (NRHA), said hospitals often generate more profits from inpatient visits—which can include costly procedures—than outpatient visits, which can include less costly, less complex procedures. Slabach said rural hospitals have not been able to offset the losses in inpatient visits with a steady rise in outpatient visits. Citing NRHA data, Slabach said 44% of rural hospitals in 2016 operated at negative margins, compared with 41% of rural hospitals in 2015. Slabach said, as a result, some rural hospitals closed, adding, "There have been some urban closures ... but they've not been at the rate that they have been in rural" (Bannow, Modern Healthcare, 1/6; Bannow, Modern Healthcare, 1/4; Diamond, "Pulse," Politico, 1/5; AHA News, 1/4; Haefner, Becker's Hospital CFO Report, 1/5).

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