QSS: Dramatic Drop In Hospital Profitability in 3rd Quarter

The latest Quarterly Services Survey (QSS) showed a dramatic turnaround in hospitals’ fortunes. Quarterly revenues dropped two percent from the 2nd quarter, while offices of physicians and home health services grew over three percent (see Table I). Hospital revenue grew only 5.3 percent from 2014 Q3 to 2015 Q3, but that was still significantly lower than growth for most other health services.


In the previous QSS, I discussed the healthy rise in hospital margins. That has changed dramatically. The Q3 data is subject to revision. Nevertheless, it indicates a dramatic change in hospitals’ fortunes (see Table 2).


For tax-exempt general medical and surgical hospitals (which comprise almost 90 percent of hospitals’ revenue), net revenue (revenue minus expenses) dropped from $390 to $207 per inpatient day, and net revenue per discharge dropped from $2,083 to $1,113. For taxable hospitals, the drops were much less dramatic, but still significant.

These changes in profitability were driven by the top line. Revenues for tax-exempt hospitals dropped 2.5 percent while expenses increased 0.9 percent.

Maybe price-sensitive patients really are increasingly able to shop around and force competition among hospitals. If so, this is a very welcome development. However, one quarter does not make a trend.

Comments (4)

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  1. Ron Greiner says:

    This healthcare profitability problem may be getting out of hand. Another insurance company is throwing in the towel as reported to Avik Roy by a FORBES comment.

    The Pain in Maine – Obamacare is Republican’s Fault!

    “Here in Maine, our co-op just reported that they lost over 17 million dollars in the first 9 months of the year. They suspended enrollment in their off exchange individual plans effective today, and will be suspending enrollment in their exchange plans on Dec 26. They are the only PPO plan on the ME exchange. They captured 80% of the individual market and if they go under, the only remaining plans in the exchange will be limited network HMO plans and HMO plans. The provider networks will not be adequate to serve the number of policyholders in the individual markets.

    There are no longer any plans in the on or off exchange market that coordinate benefits with Medicaid. This means that sick children, children with autism and adults with disabilities who qualify for Medicaid are all seeing either significant decreases in their access to medically necessary care and/or significant increases in their costs in order to access medically necessary care. No matter who wins the election in 2016, Maine’s individual health insurance market will already be destroyed by Obama in cooperation and with the support of republicans in the Maine Legislature and their appointees.”

    It’s all politicians and the media’s fault. 4 Presidential Debates and not one Obamacare question yet. Is the big money in this country just playing us for suckers? Rubio, Rand Paul and Ted Cruz were all elected as a response to Obamacare yet they now can’t say the word in a Presidential Debate. Get ready folks for President Hillary.

    But Carly did say that men can’t do anything and if you want something done get a woman.

  2. Ron Greiner says:

    In sunny Florida we know better, “Wasting away again in Margaritaville, searching for my lost shaker of salt,
    Some people claim that there’s a woman to blame,
    But I know, it’s ALL women’s fault.

  3. Ron Greiner says:

    OH NO! More profitability problems in sunny South Florida.

    Reported by the Palm Beach Post: “One day before an extended deadline to secure Jan. 1 health coverage, the Florida Office of Insurance Regulation issued a consumer alert on two companies Wednesday.

    Officials reminded consumers Cigna Health and Life Insurance Co. and Preferred Medical Plan Inc. will no longer be providing coverage to policyholders on the Affordable Care Act exchange for plan year 2016.”

    And who do they blame: “addiction treatment fraud for its decision not to offer marketplace plans in 2016, though the company hopes to resume in 2017. An estimated 30,000 customers were affected, the newspaper reported at the time.

    Preferred, based in Coral Gables, said a maximum of 77,000 customers are affected. A company statement cited problems in the federal government’s “risk corridor” plan, where Congress blocked certain sources of funding for the program intended to help insurers cover unexpected losses.”

    It is wicked evil when the government doesn’t pay for your losses. How can any company be profitable with a stingy Government like that?

    So 107,000 Floridians you have 24 hours to get coverage with a 1/1/2016 effective date.

  4. Bob Hertz says:

    Thanks for the update.

    Just for the record, Cigna announced its withdrawal from the exchanges in October.
    And the deadline to find a new plan in FL was extended to Jan. 1.

    The Preferred withdrawal is disturbing though. I am an agent for United HealthOne and they are doing an equally abrupt although partial withdrawal.

    Preferred One must have known on Nov 1 that they were not going to get the ACA risk corridor payments that they were expecting. Have they been playing for time, hoping that Obama would bail them out? Or this a matter of sloppy state regulation. Seems to me that if a state thinks a carrier risks insolvency, they should ban that carrier from the exchanges before the open enrollment starts.