Market Segment in Focus: Non-Profit Hospitals

April 10th, 2014

In 2012 U.S. hospitals generated revenues totaling $883.2 billion. This grew from 2008 to 2013 at an annual rate of 3.4%. It is expected to grow at an annual rate of 3.9% up to the year 2018. The total profit is $67.1 billion (revenue minus expenses). The hospital industry is divided into three major groups: non-profit hospitals, for-profit hospitals, and government owned hospitals. There are currently 2,903 non-profit hospitals, 1,025 for-profit hospitals, and 1,253 government owned hospitals. The largest sector is non-profit hospitals that makes up 56% of the industry.

A non-profit hospital, also referred to as a not-for-profit hospital, is a hospital which is organized as a non-profit corporation due to its charitable purpose or affiliation with a religious denomination. Non-profit hospitals are distinct from government owned public hospitals and privately owned for-profit hospitals because a portion of the services they provide are charitable.

Non-Profit Hospital Groups Sample

non-profit hosp sample1

 

 

 

 

 

 

 

 

 

 

 

In order to get a better look at the industry, a sample of the 10 largest non-profit hospital groups (largest as defined by number of hospitals owned) was taken for the purpose of drawing predictions in this article. The sample comprises 15.4% of the nonprofit hospital sector, which is 447 hospitals.* This is a breakdown of the 10 hospitals selected.

 

Revenue Trends

top 10 revThe revenue of almost every hospital group shows an increase from 2010 to 2012. Average revenue is also calculated to obtain a growth rate in the three years. The average revenue from 2010 was almost $7 billion, in 2011 was slightly less than $7.4 billion, and in 2012 was $7.9 billion. From 2010-2011 the revenue grew at a rate of 5.49%, and from 2011-2012 it grew an even higher rate of 7.79% (see Figure 4). This indicates that the revenue is not only increasing, but is increasing at an rising rate. However, Obamacare will have an impact on this.

 

Accounts Receivable

From this sample, the amount going to accounts receivable had been increasing at a solid rate according to the collective average. This positive growth brought a negative impact on non-profit hospitals; even worse, there could be serious repercussions with the implementation of Obamacare. Obamacare focuses on providing medical insurance to all Americans, but with higher deductible amounts. So, for those who didn’t have medical insurance previously, they could benefit by enrolling for coverage. In some cases, consumers still may not be able to pay those medical bills, which would create delinquency in accounts receivable. In addition, Obamacare tends to control healthcare spending. Medicare and Medicaid will review the bills from hospitals with outsourcing auditing groups. They will deny more bills for wrong coding or unnecessary services, which creates ARM opportunities. *When preparing the selected sample, privately owned hospitals were omitted because of their inaccessible financial statements.

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