Trends in Hospital Financing · TRENDWATCH CHARTBOOK 2018 Source: Analysis of American Hospital Association Annual Survey data, 2016, for community hospitals. (1) Non -patient represents

TRENDWATCH CHARTBOOK 2018

Trends in Hospital Financing

Chart 4.1: Percentage of Hospitals with Negative Total and Operating Margins, 1995 – 2016

Source: Analysis of American Hospital Association Annual Survey data, 2016, for community hospitals. (1) Total Hospital Margin is calculated as the difference between total net revenue and total expenses divided by total net revenue.(2) Operating Margin is calculated as the difference between operating revenue and total expenses divided by operating revenue.

0%

5%

10%

15%

20%

25%

30%

35%

40%

45%

95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16

Negative Operating Margin

Negative Total Margin



Chart 4.2: Aggregate Total Hospital Margins(1) and Operating Margins,(2)

1995 – 2016

Total Margin

Operating Margin

0%

2%

4%

6%

8%

10%

95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16

Source: Analysis of American Hospital Association Annual Survey data, 2016, for community hospitals. (1) Total Hospital Margin is calculated as the difference between total net revenue and total expenses divided by total net revenue.(2) Operating Margin is calculated as the difference between operating revenue and total expenses divided by operating revenue.



Chart 4.3: Distribution of Outpatient vs. Inpatient Revenues, 1995 – 2016

Source: Analysis of American Hospital Association Annual Survey data, 2016, for community hospitals.

Gross Inpatient

Revenue

Gross Outpatient

Revenue

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16



Chart 4.4: Annual Change in Hospital Operating Revenue and Expenses per Adjusted Admission,(1) 1995 – 2016

-2%

0%

2%

4%

6%

8%

10%

95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16

Change in Total Expenses

Change in Operating Revenue

Source: Analysis of American Hospital Association Annual Survey data, 2016, 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.


Source: Analysis of American Hospital Association Annual Survey data, 2016, for community hospitals.(1) 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.(2) Uncompensated care represents bad debt expense and charity care, at cost.(3) Private payer formulas were updated in 2014 to account for the change in bad debt calculations,

which is now reported as a deduction from revenue rather than a expense. (4) Percentages were rounded, so they do not add to 100 percent in all years.


Chart 4.5: Distribution of Hospital Cost by Payer Type, 1980, 2000, and 2016

(4) (4) (4)

Medicare, 34.6% Medicare, 38.3% Medicare, 40.8%

Medicaid, 9.6%Medicaid, 12.8%

Medicaid, 18.5%Other Government,6.1%

Other Government, 1.4%

Other Government, 1.5%

Private Payer, 41.8% Private Payer, 38.7%

Private Payer,(3) 33.4%

Uncompensated Care,(2) 5.1%



Non-patient,(1) 2.7% Non-patient,(1) 2.8% Non-patient,(1) 2.1%

1980 2000 2016



Chart 4.6: Aggregate Hospital Payment-to-Cost Ratios for Private Payers, Medicare, and Medicaid, 1995 – 2016

Source: Analysis of American Hospital Association Annual Survey data, 2016, for community hospitals. (1) Includes Medicaid Disproportionate Share Hospital payments.(2) Includes Medicare Disproportionate Share Hospital payments.

70%

80%

90%

100%

110%

120%

130%

140%

150%

95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16

Private Payer

Medicaid(1)

Medicare(2)



-$60

-$55

-$50

-$45

-$40

-$35

-$30

-$25

-$20

-$15

-$10

-$5

$0

$5

97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16

Bill

ions

Chart 4.7: Hospital Payment Shortfall Relative to Costs for Medicare, Medicaid and Other Government, 1997 – 2016(1)

Medicare

Medicaid

Other Government

Source: Analysis of American Hospital Association Annual Survey data, 2016, for community hospitals. (1) Costs reflect a cap of 1.0 on the cost-to-charge ratio.



Chart 4.8: Income from Investments and Other Non-Operating Gains(1) as a Percentage of Total Net Revenue, 1995 – 2016

-1.0%

0.0%

1.0%

2.0%

3.0%

4.0%

5.0%

95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16

Perc

enta

ge o

f T

ota

l N

et

Revenue

Source: Analysis of American Hospital Association Annual Survey data, 2016, for community hospitals. (1) 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.



Chart 4.9: Number of Bond Rating Upgrades and Downgrades, Not-for-profit Health Care, 1997 – 2017

Source: Email correspondence with Fitch Ratings, Inc.

-50

-30

-10

10

30

50

97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16 17

Upgrades

Downgrades



Chart 4.10: Median Average Age of Plant, 1995 – 2015

8.8 8.89.2 9.3 9.2 9.4 9.7 9.8 9.8 9.8 9.9 9.8 9.8 9.6 9.8

10.1 10.3 10.1 10.2

10.911.5

0

2

4

6

8

10

12

95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15

Years

Source: Optum, Almanac of Hospital Financial and Operating Indicators, 2005, 2008, 2009, 2010, 2011, 2013, 2014, 2015, 2016, and

2017; CHIPS, The Almanac of Hospital and Financial Operating Indicators, 1994 and 1996-7.



Chart 4.11: Percent Change in Employment Cost Index,(1) All Private Service Industries, All Health Services and Hospitals, 2005 – 2017(2)

Source: Bureau of Labor Statistics, Employment Cost Index, 12 months ending December 2017. Link: www.bls.gov.(1) Total compensation.(2) Data represent annualized 12 month percent change.

0%

1%

2%

3%

4%

5%

05 06 07 08 09 10 11 12 13 14 15 16 17

All Private Service

Industries

Hospitals

All Health Services

Documents

Trends in Hospital Financing · TRENDWATCH CHARTBOOK 2018 Source: Analysis of American Hospital Association Annual Survey data, 2016, for community hospitals. (1) Non -patient represents