A recent Johns Hopkins study found that while most U.S. hospitals lost money on patient care services in fiscal year 2013, seven of the 10 most profitable hospitals were nonprofits. Profits from these hospitals ranged from $163 million to the $302.5 million earned by Gundersen Lutheran Medical Center in La Crosse – which is the most profitable hospital in the nation, according to the study which was published in the May issue of Health Affairs.
With the current national debate surrounding hospital consolidation and its effects on pricing, the study generated considerable reaction and discussion. The findings prompt a number of questions about how nonprofits could generate such significant profits while more than half of all hospitals experienced small losses from patient care services.
Study leader, Gerard Anderson, PhD, probably postulates for many health care stakeholders when he says, “A small subset of nonprofit hospitals are earning substantial profits…either they’re doing something right or they are taking advantage of a flawed payment system.”
Andersen maintains the most profitable hospitals are those with little or no competition in their market – allowing them to charge very high rates for private insurers who must include those facilities in their networks for customers in those markets. The study found other factors affecting hospital profits include whether the market has a dominant insurer, the hospital’s prestige or teaching status, retail price markup, uninsured and Medicare patient mix and for-profit or not-for-profit ownership.
What is Gundersen Lutheran Medical Center’s reaction to study? In a statement to The Washington Post, the hospital claimed the study did it an injustice by not accurately portraying Gundersen ‘s costs as a largely rural system operating across multiple states with a large Medicare population.
Says Anderson, “The system is broken when nonprofit hospitals are raking in such high profits. The most profitable hospitals should either lower their prices or put those profits into other services within the community. We need to develop incentives that allow all hospitals to make a fair profit while at the same time keeping prices reasonable.”