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.”