Money for Nothing and Risk for Free

There was a trampoline at the bottom of the cliff. Hospital profit margins bounced back in a big way in 2023, according to the Medicare Payment Advisory Commission’s (MedPAC) annual March report to Congress. MedPAC released the 527-page report to the public on March 13.

Despite the usual incessant whining from the hospital lobby, hospitals’ all-payer operating profit margin jumped to 5.1% in 2023 from 2.7% in 2022. The 2.7% margin in 2022 followed a record 8.8% margin in 2021. That prompted me to write this blog post last year: “My, How the Margins Have Fallen.” A better headline would have been: “Hospital Profitability Takes a Brief Respite.”

Things were even better for what MedPAC defines as “relatively efficient” hospitals. Those 123 hospitals posted a 7% all-payer operating profit margin in 2023 compared with 2% for all other hospitals.

MedPAC also said hospitals’ all-payer total profit margin, which includes investment income as well as donations, nearly tripled in 2023 to 6.4% from 2.3% in 2022.

All of this profitability came with very little change in other hospital performance metrics tracked by MedPAC. For example:

• Hospitals’ risk-adjusted patient mortality rate dipped to 7.6% in 2023 from 7.9% in 2022.
• Hospitals’ risk-adjusted 30-day readmission rate rose slightly to 15% in 2023 from 14.6% in 2022.
• Hospitals’ overall H-CAHPS score (the percentage of patients who rated their hospital stay a 9 or 10 out of 10) crept up to 72% in 2023 from 70% in 2022.

More money for the same results. That business model may be good for hospitals, but it’s not good for patients. To learn more about this topic, check out:

• “Hospitals Posted Record Profit Margins?”
• “When Being More Efficient Produces Better Outcomes”
• “The Pandemic Has Been Very, Very Good to Rural Hospitals”

Next week let’s see what MedPAC had to say about hospital capacity.

Thanks for reading.