Research Note: Relative Profitability of Acute Care Hospital Services (2d Edition)

Abstract

This research note categorizes acute care hospitals services as relatively profitable, relatively unprofitable, variably profitable, or uncertain. It updates “Research Note: Relative Profitability of Acute Hospital Services,” an online exhibit to Horwitz, “Making Profits and Providing care: Comparing Nonprofit, For-Profit, and Government Hospitals,” Health Affairs 24, no. 3 (2005): 790-801. Whether a service is likely to be profitable for any individual hospital depends on many circumstances, such as the patient population most likely to receive it, market conditions, insurer and government policies at the time the service is adopted and provided, the management priorities and skills of the hospital executives, and a host of other factors. Consequently, despite the rigorous nature of this service review, our relative profitability designations do not mean that a service is, in fact, profitable for hospitals, even most of the time. This note offers a simple categorization of relative profitability, not absolute profitability. This note attempts to suggest what services a typical administrator, faced with the decision of whether to adopt or discontinue a service, would reasonably consider to be relatively profitable or not. The services reported in this document address the major service areas offered by full-service, acute care hospitals. They are all represented, in some form, in the American Hospital Association Annual Surveys. In addition to medical services, we newly include profitability designations for the community outreach services listed in the AHA surveys. Because these services are not medical services, we have listed them separately at the end of this Research Note.

Keywords: health care, acute care hospital services, Non-profit, for-profit and government hospitals, relative profitability of services, American Hospital Association annual surveys

JEL Classification: I11, I13