Warning: Hospitals Intend to Increase Their Already Inflated Prices

The Wall Street Journal is reporting a set of numbers that do not bode well for employer health plans. The median hospital operating cash flow margin fell to 8.1% last year from 9.5% a year earlier and a high of 10.4% in 2015. They are expecting a tight labor market and loss of business to competitors based on the growing realization that any form of care in by a hospital-owned facility or provider is about 5 times higher than the same service rendered by a non-hospital owned facility or provider. The hospitals have also stated that they have wrung out all of the extra profit ACA directed toward them. This is an initial “warning shot” that hospitals intend to increase their already inflated prices even more.

There are a lot of reasons that this should not be acceptable to anyone paying for the cost of healthcare:
1. An 8.1% profit margin for a non-profit organization is pretty generous.
2. This does not include the “non-operating” margin which is a number that exceeds the operating margin on most hospital financial statements.
3. They are not even discussing improving operations with an eye toward improving quality and service while reducing costs like virtually every other industry in existence has been doing for the past 30 years.
4. ACA already removed the majority of their previous justifications for “tax exempt” status by reducing their “bad debt” to less than 2% of their billings.

Hospital costs alone already make up more than half the cost of any health plan. They are now going to make an effort to increase their costs even more. Without out of pocket costs and foregone wages for a family of four exceeds $25,000 per year, further cost increases are getting more and more unmanageable for many employers and employees.

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