Trends in the Overall Health Care Market
Chapter 4:
Trends in Hospital Financing
Chartbook 2005
Trends in the Overall Health Care Market
Chart 4.1:
Percentage of Hospitals with Negative Total Margins
1980 - 2003
35%
30%
25%
20%
15%
10%
5%
0%
80 81 82 83 84 85 86 87 88 89 90 91 92 93 94 95 96 97 98 99 00 01 02 03
Source: The Lewin Group Analysis of the American Hospital Association Annual Survey data, 1980 – 2003, for
community hospitals
Chartbook 2005
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Trends in the Overall Health Care Market
Chart 4.2:
Aggregate Total Hospital Margins(1), Operating
Margins(2), and Patient Margins(3)
1990 - 2003
8%
6%
Total Margin
4%
2%
Operating Margin
0%
-2%
Patient Margin
-4%
-6%
90
91
92
93
94
95
96
97
98
99
00
01
02
03
Source: The Lewin Group Analysis of the American Hospital Association Annual Survey data, 1990 - 2003, for community hospitals
(1)
(2)
(3)
Chartbook 2005
Total Hospital Margin is calculated as the difference between total net revenue and total expenses divided by total net revenue
Operating Margin is calculated as the difference between operating revenue and total expenses divided by operating revenue
Patient Margin is calculated as the difference between net patient revenue and total expenses divided by net patient revenue
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Trends in the Overall Health Care Market
Chart 4.3:
Hospital Margins Reported to DATABANK(1)
2003 vs. 2004
6%
5.11% 5.06%
5%
4%
3.41% 3.36%
3%
2%
1%
0%
-1%
Total Margin
Operating Margin
2003
-0.95% -1.0%
Patient Margin
2004
Source: DATABANK data.
(1)
Chartbook 2005
Data represent the experience of 884 hospitals that consistently reported to DATABANK in 2003 and
2004. Data are unweighted and over represent smaller hospitals in western, rural states. A subset of
states are not represented in DATABANK. DATABANK is an online database of hospital utilization and
financial performance indicators.
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Trends in the Overall Health Care Market
Chart 4.4:
Distribution of Outpatient vs. Inpatient Revenues
1980 - 2003
100%
90%
80%
Gross
Inpatient
Revenue
70%
60%
50%
40%
30%
20%
Gross
Outpatient
Revenue
10%
0%
80 81 82 83 84 85 86 87 88 89 90 91 92 93 94 95 96 97 98 99 00 01 02 03
Source: The Lewin Group analysis of American Hospital Association Annual Survey data, 1980 – 2003,
for community hospitals
Chartbook 2005
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Trends in the Overall Health Care Market
Chart 4.5:
Annual Change in Hospital Operating Revenue and
Expenses per Adjusted Admission(1)
1981 - 2003
18%
16%
14%
12%
10%
8%
6%
4%
2%
0%
-2%
81 82 83 84 85 86 87 88 89 90 91 92 93 94 95 96 97 98 99 00 01 02 03
Change in Operating Revenue
Change in Total Expenses
Source: The Lewin Group Analysis of the American Hospital Association Annual Survey data, 1981 - 2003, for
community hospitals
(1) An aggregate measure of workload reflecting the number of inpatient admissions, plus an estimate of the
volume of outpatient services, expressed in units equivalent to an inpatient admission in terms of level of effort
Chartbook 2005
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Trends in the Overall Health Care Market
Chart 4.6:
Distribution of Hospital Cost by Payer Type
1980, 2002, and 2003
Non-patient(1) – 2.7%
Uncompensated Care(2) – 5.1%
Private Payer – 41.8%
Other Government – 6.1%
Medicaid – 9.6%
Medicare – 34.6%
1980
2002
2.6%
5.4%
Non-patient(1) – 2.6%
Uncompensated Care(2) – 5.5%
38.2%
Private Payer – 37.5%
1.6%
Other Government – 1.6%
13.9%
Medicaid – 14.3%
38.4%
Medicare – 38.5%
2003
Source: The Lewin Group Analysis of the American Hospital Association Annual Survey data, 1980,
2002, and 2003, for community hospitals
Non-patient represents costs for cafeterias, parking lots, gift shops and other non-patient care
operating services and are not attributed to any one payer
(1)
(2)
Chartbook 2005
Uncompensated care represents bad debt expense, at cost, and charity care
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Trends in the Overall Health Care Market
Chart 4.7:
Aggregate Hospital Payment-to-Cost Ratios
for Private Payers, Medicare, and Medicaid
1980 - 2003
140%
130%
Private Payer
120%
110%
Medicare
100%
Medicaid(1)
90%
80%
70%
80 81 82 83 84 85 86 87 88 89 90 91 92 93 94 95 96 97 98 99 00 01 02 03
Source: The Lewin Group analysis of American Hospital Association Annual Survey data, 1980 – 2003, for
community hospitals
(1)
Chartbook 2005
Includes Medicaid Disproportionate Share payments
4-8
Trends in the Overall Health Care Market
Chart 4.8:
Hospital Payment Shortfall Relative to Costs
Medicare, Medicaid, and Other Government
1997 - 2003
$6
$4
$2
Billions
$0
Medicare
-$2
-$4
-$6
-$8
Medicaid
-$10
-$12
Other Government
-$14
97
98
99
00
01
02
03
Source: The Lewin Group analysis of American Hospital Association Annual Survey data, 1997 – 2003, for
community hospitals
Chartbook 2005
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Trends in the Overall Health Care Market
Chart 4.9:
Income from Investments and Other Non-operating Gains(1)
as a Percentage of Total Net Revenue
1980 - 2003
3.0%
2.5%
2.0%
1.5%
1.0%
0.5%
0.0%
80 81 82 83 84 85 86 87 88 89 90 91 92 93 94 95 96 97 98 99 00 01 02 03
Source: The Lewin Group analysis of the American Hospital Association Annual Survey data, 1980 - 2003, for
community hospitals
(1)
Chartbook 2005
Non-operating gains include income from non-operating activities, including investments, endowments
and extraordinary gains, as well as the value of non-realized gains from investments
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Trends in the Overall Health Care Market
Chart 4.10:
Number of Bond Rating Upgrades and Downgrades of
Non-profit Hospitals
1993 - 2004
63
69
61
41
34
35
19
12
26
32
28
95
96
97
98
Source: Standard & Poor’s, 2005
Chartbook 2005
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11
21
37
62
73
94
10
28
55
93
10
99
59
00
55
01
45
61
02
03
04
Trends in the Overall Health Care Market
Chart 4.11:
Median Average Age of Plant
1990 - 2003
12
10
Years
8
7.9
8
8.2
90
91
92
8.4
8.6
8.8
8.9
9.2
93
94
95
96
97
9.3
9.2
9.4
9.6
9.8
9.8
98
99
00
01
02
03
6
4
2
0
Source: CHIPS: The 1994 Almanac of Hospital and Financial Operating Indicators, The 1996-7 Almanac of Hospital
and Operating Indicators, and 1998-2003 data from Ingenix: Almanac of Hospital Financial and Operating
Indicators 2005
Chartbook 2005
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Trends in the Overall Health Care Market
Chart 4.12:
Percent Change in Employment Cost Index(1), All Private
Service Industries, All Health Services, and Hospitals
September 2004(2)
6%
5%
4%
4.4%
4.3%
All Health Services
Hospitals
3.4%
3%
2%
1%
0%
All Private Service
Industries
Source: Bureau of Labor Statistics, Employment Cost Index, 12 Months Ending September, 2004; www.bls.gov
(1)
(2)
Chartbook 2005
Total compensation
Data is for 12 months ending September 2004; December 2004 data has not been published as of yet
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