Hospital margins offer one way to judge the financial health of healthcare facilities. Here are five things to know about hospital margins.
1. According to a Truven Health Analytics examination of about 500 hospitals, the median total margin for all hospitals was 5.53 percent in 2012. It was the highest (7.54 percent) for large community hospitals and lowest (4.94 percent) for small community hospitals.
2. An Avalere Health analysis of 2012 American Hospital Association Annual Survey data found aggregate total hospital margins have been on the rise for the past 20 years, rising from 4.6 percent in 1992 to 7.8 percent in 2012 (although there was a dip to 2.6 percent in 2008).
3. Although they have increased during the past couple of decades, hospital margins pale in comparison to the most profitable industries. According to a Forbes report an analysis by the financial information company Sageworks, the most profitable industries from February 2012 to March 2013 had net profit margins ranging from 16.5 percent (dentists' offices and real estate lessors) to 24.1 percent (oil and gas extraction).
4. The Avalere analysis also found aggregate operating margins have risen from 2.7 percent in 1992 to 6.5 percent in 2012. Patient margins — which measure only the difference between net patient revenue and total expenses — have also gotten wider, although they're still extremely narrow at 0.7 percent in 2012, compared with -2.7 percent in 1992.
5. According to the Avalere analysis, the percentage of hospitals with negative total margins decreased slightly from 23.8 percent in 1992 to 21.3 percent in 2012. The percentage of hospitals with negative operating margins dropped from 28 percent in 1995 (the earliest year with data available) to 25.9 percent in 2012.
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