Boom! Hospital Revenue Up 5 Percent in Twelve Months

This morning’s Quarterly Services Survey (QSS) released by the Census Bureau reported that hospitals’ revenue rose 4.9 percent from the end of the second quarter in 2013 to the end of the second quarter in 2014. From the first quarter to the second quarter of 2014, it jumped 2.8 percent, overcoming a first quarter drop of minus 0.8 percent. Revenue for ambulatory services rose only 2.4 percent in the same twelve months. It jumped 3.0 percent from the first quarter of 2014, but had dropped 2 percent in the first quarter from the end of 2013.

The QSS surveys a sample of service businesses, and is assuming increasing importance in economic research. It is important because it reveals complementary — and in this case contradictory — data about health spending. As I’ve discussed frequently at this blog, healthcare employment is growing steadily, but not in hospitals. Growth is in the outpatient setting. I had hoped that this indicated that health services were moving out of the high fixed-cost hospital setting and into lower fixed-cost outpatient settings, especially convenient retail clinics.

That does not appear to be happening. Instead, hospitals are grabbing a bigger share of the pie (despite their complaints of financial distress) but not increasing headcount. Unless there has recently been some amazing jump in hospital productivity of which I am unaware, this increase in revenue per hospital employee is a very worrying sign for future health spending.

Comments (7)

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  1. Frank says:

    I would hope that retail clinics would have provided a way to lower overall costs.

  2. Perry says:

    The trend is once again hospitals buying up doctors’
    practices. This does not bode well for lower costs or necessarily better care, or even better access.

    • John R. Graham says:

      Thank you. That might also be buried in this data, and is of concern. We have written about that in this blog. It is interesting that Obamacare encourages this, but state attorneys-general are suing to stop it, under antitrust laws.

    • says:

      Hospitals have been given a windfall by Obamacare and are exploiting it as much as they can. Government controlled healthcare rewards consolidation and disincentivizes independent provided healthcare. It is a feature of Obamacare –not an unintended consequence.

  3. Erik says:

    Bundled payments for positive outcomes is the only way to bend the curve. Fee for Services is what drives up costs. Give Doctors a fixed amount and they will learn to practice within those boundaries.

    • says:

      Search “bundled payments” on this site. You will find it is a failed concept. Top down dictated payment for services doesn’t work. Bidding on specific components of healthcare delivery might work for a healthy population but not for outliers–i.e. those with comorbidities such as the elderly. Bundling results in covert rationing–providers denying treatment to those they know will result in a net loss and doing so using methods that defy tracking.

      • John R. Graham says:

        Thank you. The idea that there is one solution that can be stamped onto every specialty, in every area of the country, is not well founded.

        Most things in our lives are “fee for service”. The providers have to be free to bundle and rebundle the goods and services they offer to consumers. And consumers have to be in control of the health spending.

        Those two steps would make most of the apparent problems of fee-for-service go away.