Does Increase In Throughput Mean More Money For The Hospitals

Hospital care is the largest component in US health care spending (32 percent), and it increased by 4.1 percent from 2013 to 2014, reaching $972 billion. ¹ In this study, using data from fiscal year 2013 for all US acute care hospitals, we examined the factors that are associated with hospital profitability for patient care services, focusing our attention on the characteristics of the most profitable hospitals. ²

For years the Medicare Payment Advisory Commission (MedPAC) has been analyzing trends in hospital margins to provide recommendations to Congress about Medicare payment adjustments. MedPAC has consistently found that for-profit hospitals, urban hospitals, and nonmajor teaching hospitals (those with a ratio of interns and residents to beds of less than 0.25) have higher overall margins, compared to other hospitals. ³ In the health services research literature, the factors influencing hospital profitability generally fall into one of the following three broad categories: ownership; ⁴ ^, ⁵ market power; ⁶ ^, ⁷ and other characteristics, such as size and teaching status. ⁸ Our study extends MedPAC analyses and the health services research literature by incorporating the following new factors: markup, prestige, the market share of the largest insurer in the state, health maintenance organization (HMO) penetration into the hospital's market, and state rate-setting regulation.

We measured hospital profitability using the net income from patient care services per adjusted discharge, which provides an alternative to the more commonly used overall profit margin in understanding hospital profitability. Overall profit margin contains many activities unrelated to patient care services, including the following: donations, investments, communication services, television and radio services, purchase discounts, rebates and refunds of expenses, parking fees, laundry and linen service, meals sold to employees and guests, rental of living quarters, sales of medical and surgical supplies to nonpatients, sales of drugs to nonpatients, sales of medical records and abstracts, tuition, sales from shops (gift, flower, and coffee shops and canteens), rental of vending machines, and rental of hospital space. ⁹ Hospitals frequently earn profits from these services to subsidize their patient care services.

The main reason for conducting this analysis was to identify the characteristics of the most profitable hospitals. If they have characteristics in common, then policy makers should consider the market forces and policy factors that may be related to these characteristics and determine if specific policies may have fostered the hospitals' financial advantage. Since the hospital industry is undergoing significant reforms, this baseline information could also facilitate the monitoring of winners and losers in the reform efforts. Are the hospitals that benefit in today's environment likely to be the same ones that will benefit in the new environment?

Study Data And Methods

Data

We used the fiscal year 2013 Medicare Cost Reports and Final Rule Data from the Centers for Medicare and Medicaid Services. The former source contains financial information for Medicare-certified hospitals. ⁹ The latter source provides case-mix index and wage index information for all acute care hospitals that received Medicare inpatient reimbursement based on the inpatient prospective payment system. ¹⁰

The merged data set contained information about 3,255 acute care hospitals with fiscal years beginning between October 1, 2012, and September 30, 2013. We excluded 246 hospitals that were missing the complete data required for us to determine the values for variables used in the statistical analysis. We also excluded 16 hospitals that had data anomalies, such as having a charge-to-cost ratio lower than 0.2 or higher than 15.0 or an expense-to-revenue ratio lower than 0.5 or higher than 3.0. The final data set had information about 2,993 acute care hospitals, of which 59 percent were nonprofit, 25 percent were for profit, and 16 percent were public.

Profitability Measure

Of the many ways to measure hospital profitability, we chose to use net income from patient care services. This indicates the profitability of both inpatient and outpatient services for all patients and is calculated as the sum of government appropriations and the difference between net patient revenue and total operating expenses for all patients. The value for net income from patient care services was obtained from the Medicare Cost Report Worksheet G-3 Statement of Revenues and Expenses. ¹¹

To compare profitability across hospitals that differ widely in the number of inpatient discharges and outpatient visits, profit is typically divided by a measure of output volume. The number of discharges can be a proxy for inpatient care output volume, but it does not include outpatient care output volume. Following the health economics literature, we used as the scaling variable—the variable by which profit is divided—adjusted discharges, which were calculated as the number of discharges multiplied by the ratio of total gross revenue to inpatient gross revenue. ¹² ^, ¹³

Because wage level and case complexity also vary significantly across hospitals, we included each hospital's Medicare case-mix index and wage index in the denominator to make profitability more comparable across hospitals—an approach consistent with that in the health care finance literature. ¹⁴ The resulting hospital profitability measure is the net income from patient care services scaled by adjusted discharge, case-mix index, and wage index (hereafter, net income from patient care services per adjusted discharge).

We also calculated the profit margin from patient care services as an alternative measure of hospital profitability. This margin is the net income from patient care services scaled by net patient revenue. Finally, we calculated the profit generated from all activities (patient care services and nonoperating activities) scaled by adjusted discharge, wage index, and case-mix index to understand hospital financial viability.

Regression Analysis

After using bivariate analysis to compare net income per adjusted discharge across hospital and geographic characteristics, we applied regression analysis in three steps to explain the variation in profitability across hospitals. First, we used a linear model to examine the variation in the net income per adjusted discharge. Second, we used a probit model to differentiate between profitable and unprofitable hospitals. Finally, we used a linear model to examine the variation in the profit margin from patient care services.

Based on the hospital finance literature, we hypothesized that the following factors were associated with hospital profitability. "Markup" is calculated as the ratio of total hospital gross charges to Medicare-allowable costs. ¹⁵ ^, ¹⁶ "Regional power" measures each hospital's level of dominance in its referral region. We used the Dartmouth Atlas of Health Care to define regions based on Medicare patient-flow information. ¹⁷ The market concentration of each referral region was measured by its Herfindahl-Hirschman Index. ¹⁸ ^– ²⁰ We calculated each hospital's market share as its discharges (if it was an independent hospital) or the discharges of its system (if it was affiliated with a system) divided by total discharges in the region. By calculating hospital market share based on system affiliation, we avoided treating hospitals owned by the same system as potential competitors.

We compared a hospital's market share to the Herfindahl-Hirschman Index of the region to identify the relative regional power of a hospital. ⁷ If a hospital's market share was greater than its regional system Herfindahl-Hirschman Index, then regional power had a value of 1; otherwise it had a value of 0. We expected markup and regional power to be positively associated with hospital profit.

We also included "prestige" in the model, because it has been argued that most health insurance networks must include prestigious hospitals to be credible, and this should make them more profitable. ²¹ We rated a hospital as having prestige if it was recognized in the 2015–16 U.S. News & World Report 's Best Hospitals Honor Roll, ²² which was determined based on 2013 survey results. ²³

We also included three state-level independent variables. "Price regulation" had a value of 1 if a hospital was in Maryland or West Virginia (the only two states with price regulation). ¹⁶ "Largest insurer share," or the market share of the largest insurer in the state, was obtained from the Henry J. Kaiser Family Foundation. ²⁴ "HMO penetration," or the state HMO penetration rate, was also obtained from the Kaiser Family Foundation. ²⁵ We expected hospitals in states with price regulation, dominant insurance plans, and higher HMO penetration to be less profitable than other hospitals.

Consistent with previous literature and MedPAC analyses, we included the following variables that controlled for hospital characteristics: number of beds, rural or urban location, resident-to-bed ratio, ownership (for profit, nonprofit, or public), system affiliation (yes or no), proportion of Medicare discharges, and proportion of Medicaid discharges. ⁴ ^, ⁸ Because the proportion of low-income patients treated by a hospital is not publicly available, we used as a proxy the estimated proportion of uninsured people in the county where a hospital is located. This information was obtained from the Census Bureau's model-based Small Area Health Insurance Estimates for 2013. Finally, as a proxy for the hospital's technical efficiency, we included expenditures per adjusted discharge, which were the total operating expenditures scaled by adjusted discharge, wage index, and case-mix index.

Limitations

Our study had a number of limitations. First, we did not have access to information about the hospitals' overall case-mix. Instead, we used Medicare case-mix to adjust the net income and expenses for overall patient care services. Medicare case-mix is calculated based on Medicare patients only and thus may not accurately reflect overall hospital case-mix. Therefore, using Medicare case-mix introduces measurement noise in general and might create inaccuracies for some hospitals with significant case-mix variation between Medicare and non-Medicare patients. ²⁶

Second, Medicare Cost Reports and Final Rule Data are based on administrative records submitted by hospitals, so the data may contain inaccuracies. Third, because patient-level information was unavailable in the data set, we were unable to quantify the variation of profitability across insurance categories or by payer mix.

Fourth, we acknowledge that our analysis is exploratory and does not establish causal relationships between the hospital and the factors associated with profitability. The existence of unexplained profit variation across hospitals suggests that additional factors associated with hospital profitability were present but not captured in the statistical model.

Finally, hospital profitability could be associated with the quality of care provided. This topic is beyond the scope of our study and remains a promising one for future research.

Study Results

Descriptive Statistics

The median US hospital lost $82 on patient care services per adjusted discharge in 2013 ( Exhibit 1 ; for the distribution of hospitals, see online Appendix A). ²⁷ On a geographical basis, hospitals located in the Northeast had the highest median losses ($236), while those in the West earned a profit ($45).

**Exhibit 1 US hospitals' net income from patient care services per adjusted discharge, fiscal year 2013**
Hospital characteristic	Percent of hospitals	Median net income ($)
All hospitals	100	−82
Census region
Northeast	15	−236
Midwest	24	−34
South	43	−75
West	18	45
Markup
High a	50	114
Low b	50	−243
System affiliation
In a system	59	105
Independent	41	−282
Regional power
High	38	156
Low	62	−180
Ownership
Nonprofit	59	−84
For-profit	25	297
Public	16	−518
Location
Rural	28	−315
Urban	72	−1
Beds
Up to 50	20	−406
51–100	18	−176
101–200	27	−79
201–300	15	22
301–500	13	69
More than 500	7	109
Teaching status c
Nonteaching	68	−86
Minor teaching	21	10
Major teaching	11	−286
Average length-of-stay
Short b	50	−51
Long a	50	−104
Percentage Medicare patients
High a	50	−175
Low b	50	25
Expenditures per adjusted discharge
High a	50	−287
Low b	50	64

Hospitals with markups that were equal to or above the median (a 3.7 charge-to-cost ratio) were more likely to be profitable than hospitals with markups below the median. Hospitals affiliated with a system and hospitals with regional power earned money, while independent hospitals and those without regional power lost money. Nonprofit and public hospitals lost money, while for-profit hospitals turned a profit.

In addition, rural hospitals, those with no more than fifty beds, and major teaching hospitals had larger losses than urban hospitals, larger hospitals, and hospitals classified as minor or no teaching, respectively. Hospitals that had shorter lengths-of-stay, lower proportions of Medicare patients, and lower expenditures per adjusted discharge tended to have higher profits (or lower losses) than those with longer lengths-of-stay, higher proportions of Medicare patients, and higher expenditures per adjusted discharge, respectively. For the mean, median, first quartile, and third quartile values for all continuous variables, see Appendix B. ²⁷

Next, we divided hospitals into the following four groups based on profitability: highly unprofitable hospitals (14 percent), unprofitable hospitals (41 percent), profitable hospitals (33 percent), and highly profitable hospitals (12 percent). A hospital with a $1,000 profit per adjusted discharge (the maximum for a hospital categorized as profitable) and 25,000 adjusted discharges, which is typical for a 300-bed hospital, would have a profit of approximately $25 million from patient care services. Indeed, for the group of highly profitable hospitals, the median net income from patient care services was $28 million.

Exhibit 2 shows the average values for markup, system affiliation, and regional power for the four groups of hospitals. The results generally follow a "dose response." Highly unprofitable hospitals, on average, had a charge-to-cost ratio of 3.2; 42 percent of them were affiliated with a system; and 20 percent had regional power. In contrast, highly profitable hospitals had a charge-to-cost ratio of 5.0, and higher percentages of them were in a system and had regional power. Fifty-five percent of the highly profitable hospitals were for-profit hospitals (25 percent of the whole sample), and 6 percent were public hospitals (16 percent of the sample). For the ownership distribution for the four groups of hospitals, see Appendix C. ²⁷

We also examined the hospitals that were extremely profitable—those in the top 2.5 percent in terms of profit per adjusted discharge (over $2,475), after we excluded hospitals with fifty or fewer beds. These extremely profitable hospitals had an average charge-to-cost ratio of 5.8. Seventy-eight percent of them were for-profit, 88 percent were in a system, and 47 percent had regional power (data not shown).

We identified the ten hospitals with the highest profit from patient care services per adjusted discharge (Appendix D). ²⁷ We also identified the ten most profitable hospitals, using the profit margin from patient care services as an alternative profitability measure (Appendix E). ²⁷ In both cases we excluded hospitals with fifty or fewer beds. Seven hospitals were on both of the ten most profitable lists.

In addition, we identified the ten hospitals with the highest total profits (unscaled) from patient care services, whose profits ranged from a low of $164 million to a high of $303 million ( Exhibit 3 ). The average charge-to-cost ratio for these hospitals was 5.2, eight of them were affiliated with health systems, and all of them had regional power (data not shown). Seven of the ten are nonprofit ( Exhibit 3 ), and two (Stanford Hospital and Clinics and the Hospital of the University of Pennsylvania) are major academic medical centers.

**Exhibit 3 Ten US hospitals with the highest profit from patient care services, fiscal year 2013**
Rank	Hospital name (system)	Location	Ownership	Beds	Profit per adjusted discharge	Profit from patient care services
1	Gundersen Lutheran Medical Center (Gundersen Health System)	La Crosse, WI	Nonprofit	239	$4,241	$302.5m
2	Sutter Medical Center, Sacramento (Sutter Health)	Sacramento, CA	Nonprofit	654	$2,244	$271.9m
3	Stanford Hospital and Clinics (none)	Palo Alto, CA	Nonprofit	444	$1,339	$224.7m
4	Norton Hospital (Norton Healthcare)	Louisville, KY	Nonprofit	1,295	$1,162	$211.2m
5	Medical City Dallas Hospital (HCA)	Dallas, TX	For profit	668	$3,584	$210.3m
6	Swedish Medical Center (HCA)	Englewood, CO	For profit	329	$3,138	$192.5m
7	Hospital of the University of Pennsylvania (none)	Philadelphia, PA	Nonprofit	705	$1,020	$184.5m
8	Methodist Hospital (HCA)	San Antonio, TX	For profit	1,484	$988	$172.4m
9	Sacred Heart Medical Center, Riverbend (Peace Health)	Springfield, OR	Nonprofit	383	$2,479	$171.2m
10	Carle Foundation Hospital (Carle Foundation)	Urbana, IL	Nonprofit	328	$2,080	$163.5m

The hospital with the highest profit from patient care services was Gundersen Lutheran Medical Center ( Exhibit 3 ). It also was one of the ten hospitals with the highest profit from patient care services per adjusted discharge and one of the ten most profitable hospitals, using the profit margin from patient care services as an alternative profitability measure (Appendixes D and E). ²⁷

The median overall net income from all activities per adjusted discharge was $353 for all hospitals in the sample and $178 for hospitals that had fifty or fewer beds (data not shown).

Regression Analysis

For-profit hospitals; hospitals with higher markups, a system affiliation, regional power, or prestige; and those located in states with price regulation tended to be more profitable than other hospitals ( Exhibit 4 ). In contrast, hospitals with a higher proportion of Medicare patients, with higher expenditures per adjusted discharge, and located in counties with a high proportion of uninsured patients or in states with a dominant insurer or higher HMO penetration tended to be less profitable than hospitals without these characteristics.

**Exhibit 4 Factors influencing US hospital profitability from patient care services, fiscal year 2013**
	Profitability measures (from patient care services)
Factor	Profit per adjusted discharge ($)	Profitability probability	Profit margin
Markup	112 ***	0.10 ***	1.82 ***
System affiliation	148 *	0.37 ***	2.25 ***
Regional power	155 ***	0.23 ***	2.13 ***
Nonprofit	265 *	0.10	5.43 ***
For-profit	485 **	0.31 **	7.68 ***
Rural location	25	−0.13 **	−1.85 **
Beds (hundreds)	32	0.06 ***	0.73 ***
Resident-to-bed ratio	−4	−0.01 ***	−0.11 ***
Average length-of-stay	−126	−0.05	−1.34 ***
Percentage Medicare patients	−18 *	−0.01 ***	−0.18 ***
Percentage Medicaid patients	−7	−0.01 ***	−0.13 ***
Estimated percentage uninsured people in the county	−25 ***	−0.01 *	−0.35 ***
Prestigious a	880 ***	0.09	4.85
Market share of largest insurer in the state	−6 ***	−0.01 ***	−0.08 ***
HMO penetration	−21 **	−0.02 ***	−0.23 ***
State has price regulation	611 ***	0.55 ***	8.12 ***
Expenditures per adjusted discharge	−0.16 ***	−0.00 **	−0.00 **

We also identified the factors that predicted a hospital's profitability probability and profit margin from patient care services (Exhibit 4 ). In all three models, the following factors had significant and consistent effects: markup, system affiliation, regional power, being for profit, percentage of Medicare patients, percentage of uninsured people in the county, market share of the state's largest insurer, HMO penetration in the market, price regulation, and expenditures per adjusted discharge.

Discussion

Hospitals incurred small losses per adjusted discharge (a median loss of $82) from patient care services, with public hospitals and very small hospitals (those with fifty or fewer beds) having the lowest profitability. However, the median overall net income from all activities per adjusted discharge was a profit of $353, because many hospitals earned substantial profits from nonoperating activities—primarily from investments, charitable contributions (in the case of nonprofit hospitals), tuition (in the case of teaching hospitals), parking fees, and space rental. It appears that nonoperating activities allowed many hospitals that were unprofitable on the basis of operating activities to become profitable overall.

Twenty percent of the hospitals in our sample had fifty or fewer beds. Such hospitals provide important health care resources in many areas, especially for rural residents. Their median profit from patient care services and median overall profit per adjusted discharge were−$406 and $178, respectively. While they incurred significant losses from patient care services, it appears that their overall financial status was profitable.

Hospital prestige, as measured by inclusion in U.S. News & World Report 's Best Hospitals Honor Roll, was associated with higher profit per adjusted discharge. Two of the prestigious hospitals, Stanford Hospital and Clinics and the Hospital of the University of Pennsylvania, were among the ten hospitals with the largest total profit from patient care services. This result is consistent with the suggestion that some prestigious hospitals are able to bargain aggressively with private health insurers because they must be included in most insurers' networks. ²¹

Policy Implications

The results of this study can inform policy makers on six points.

Hospital Markup

First, hospital markup (the charge-to-cost ratio) is an important factor related to profitability from patient care services: A 1.0 unit increase in markup (for example, from 3.0 to 4.0) was associated with a $112 higher profit per adjusted discharge (as indicated by the estimated coefficient for markup in Exhibit 4 ). If the median hospital, which had a 3.0 markup, increased its charges to have a 4.0 markup but changed nothing else, our results suggest that it would become profitable.

This finding may be surprising to some analysts, since it is commonly assumed that because publicly and privately insured in-network patients pay hospitals a regulated or negotiated price, charges do not matter to the hospital's profit margin. However, in the absence of discounts or charity care, uninsured and out-of-network patients and casualty and workers' compensation insurers often pay the hospital's full charge, which can be in excess of ten times the Medicare-allowable cost. ¹⁶ Some hospitals also use high markups as leverage to increase their negotiated price from private insurers. ¹⁶ ^, ²⁸ Together, these two features make the markup, which is completely at the hospital's discretion—an important factor that influences its bottom line. ¹⁵ ^, ¹⁶ ^, ²⁹ Policy makers might consider developing policy tools that target excessive hospital markups.

System Affiliation And Regional Power

Second, policy makers should be aware of the associations between a hospital's being affiliated with a system, having regional power, and being profitable. Our results corroborate those in previous studies and suggest that hospital consolidation reduces competition, increases hospitals' regional power with private insurers, and leads to higher insurance premiums. ⁶ ^, ⁷ ^, ¹⁹ ^, ³⁰ ^– ³² As more hospitals become dominant players in the market, often through their membership in large systems, it may be increasingly difficult for private insurers to negotiate a low price. The Federal Trade Commission should look at the impact of these factors as it considers antitrust concerns in the hospital context.

As reported by MedPAC in 2015, private payers increased prices paid to hospitals by 5–6 percent annually between 2011 and 2013. ³ There appear to be differences in hospital profits that are correlated with insurance market characteristics. We found that this market can have a countervailing impact on hospital profits: A 10 percent increase in the state HMO penetration rate was associated with a $211 lower profit per adjusted discharge, and a 10 percent increase in the market share of the largest insurer in the state was associated with a $64 lower profit per adjusted discharge (as indicated by the estimated coefficients of HMO penetration and market share of the largest insurer in the state in Appendix F). ²⁷ While the recent consolidations of private insurers might limit hospitals' profitability, they could also trigger hospitals to consolidate in response to insurers' growing regional power. The Federal Trade Commission needs to examine this behavior as well.

Hospital Rate Regulation

Third, hospital rate regulation, which has been implemented in Maryland and West Virginia, was not associated with lower hospital profitability. This result is inconsistent with the continuing concern of hospital executives that rate regulation will reduce hospital profitability. However, we could not determine from the data whether the positive association between rate regulation and hospital profitability was caused by other state-level differences between Maryland and West Virginia and the other states.

Uninsured Patients

Fourth, having more uninsured patients in the county where a hospital is located was associated with lower hospital profitability. This finding complements early evidence suggesting that increased Medicaid coverage reduced bad-debt expenses and enhanced hospitals' financial strength in states that expanded eligibility for Medicaid under the Affordable Care Act. ³³ ^, ³⁴ Receiving payments through Medicaid for treating patients who would otherwise have remained uninsured appeared to benefit hospitals financially.

Nonprofit Status

Fifth, to justify their exemption from corporate income and property taxes, nonprofit hospitals are expected to provide community benefits and keep their prices affordable. ³⁵ While these hospitals need to generate sufficient revenue to maintain financial health, profit maximization should not be an institutional goal. Many nonprofit hospitals in our sample earned substantial profits from patient care services, and seven of the ten most profitable hospitals are nonprofit. Policy makers may want to consider whether nonprofit hospitals should be required to invest their profits in additional services or lower their prices to justify their tax-exempt status. This discussion is of concern to federal, state, and local policy makers alike, since many nonprofit hospitals are the largest landowners and employers in many communities.

Hospital Reform Initiatives

Finally, the Department of Health and Human Services has begun testing a number of hospital reforms, including value-based purchasing models, pay-for-performance demonstrations, readmission reforms, and accountable care organizations. These initiatives are having an impact on the profitability of certain types of hospitals. Our study provides a baseline for policy makers to use in measuring how profitability changes for certain categories of hospitals as these initiatives are expanded and in determining whether the reforms might have differential impacts on various types of hospitals. Perhaps hospitals that have the existing resources to make changes and hospitals that have developed the skills to be successful in a fee-for-service environment may adjust better to the new payment incentives. It is also possible that some new categories of hospitals will become more profitable in the new environment.

Conclusion

Evolving payment initiatives are changing the landscape of hospital finance. This study examined hospital profitability from patient care services and provided a broad picture of factors associated with that profitability, several of which have not previously been explored. We found that factors largely beyond hospitals' control—location, patient mix, and the relative market power of private insurers—were associated with hospital profitability. Factors within hospitals' control—markup and consolidation—also play important roles. Our results should inform policy makers as they monitor the level of hospital profit and redesign and examine the impacts of policy initiatives.

ACKNOWLEDGMENTS

The authors thank Donna Abrahams, two anonymous reviewers, John Colmers, Stuart Erdman, Theodore Giovanis, and Robert Murray for their valuable comments and Jianbo Liu for his technical support.

NOTES

1 Centers for Medicare and Medicaid Services . National health expenditures 2014 highlights [Internet]. Baltimore (MD) : CMS ; [cited 2016 Mar 1 ]. Available from: https://www.cms.gov/Research-Statistics-Data-and-Systems/Statistics-Trends-and-Reports/NationalHealthExpendData/downloads/highlights.pdf Google Scholar
2 We focused on operating profit in this study because that is generated from hospitals' core business—patient care—and thus is more comparable across hospitals than the overall profit is. For example, an excluded item—donation revenue—is a more important revenue source for nonprofit hospitals than for public and for-profit hospitals.
3 Medicare Payment Advisory Commission . Report to the Congress: Medicare payment policy [Internet]. Washington (DC) : MedPAC ; 2015 Mar . Chap. 3: hospital inpatient and outpatient services [cited 2016 Mar 1 ]. Available from: http://www.medpac.gov/documents/reports/chapter-3-hospital-inpatient-and-outpatient-services-(march-2015-report).pdf?sfvrsn=0 Google Scholar
4 Horwitz JR . Making profits and providing care: comparing nonprofit, for-profit, and government hospitals . Health Aff (Millwood) . 2005 ; 24 ( 3 ): 790 – 801 . Go to the article, Google Scholar
5 Horwitz JR , Nichols A . Hospital ownership and medical services: market mix, spillover effects, and nonprofit objectives . J. Health Econ . 2009 ; 28 ( 5 ): 924 – 37 . Crossref, Medline, Google Scholar
6 Capps C , Dranove D . Hospital consolidation and negotiated PPO prices . Health Aff (Millwood) . 2004 ; 23 ( 2 ): 175 – 81 . Go to the article, Google Scholar
7 Keeler EB , Melnick G , Zwanziger J . The changing effects of competition on non-profit and for-profit hospital pricing behavior . J Health Econ . 1999 ; 18 ( 1 ): 69 – 86 . Crossref, Medline, Google Scholar
8 White C , Reschovsky JD , Bond AM . Understanding differences between high- and low-price hospitals: implications for efforts to rein in costs . Health Aff (Millwood) . 2014 ; 33 ( 2 ): 324 – 31 . Go to the article, Google Scholar
9 CMS.gov . Hospital Form 2552-10 [Internet]. Baltimore (MD) : Centers for Medicare and Medicaid Services ; 2015 [cited 2015 Dec 10 ]. Available from: https://www.cms.gov/Research-Statistics-Data-and-Systems/Downloadable-Public-Use-Files/Cost-Reports/Hospital-2010-form.html Google Scholar
10 CMS.gov . Details for title: FY 2013 Final Rule Data Files [Internet]. Baltimore (MD) : Centers for Medicare and Medicaid Services ; [cited 2016 Mar 8 ]. Available from: https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/FY-2013-IPPS-Final-Rule-Home-Page-Items/FY2013-Final-Rule-Data-Files.html Google Scholar
11 Hospital-reported patient care cost, not Medicare-allowable cost, was used to derive the net income from patient care services.
12 Bazzoli GJ , Lindrooth RC , Hasnain-Wynia R , Needleman J . The Balanced Budget Act of 1997 and U.S. hospital operations . Inquiry . 2004–05 ; 41 ( 4 ): 401 – 17 . Crossref, Medline, Google Scholar
13 White C , Wu VY . How do hospitals cope with sustained slow growth in Medicare prices? Health Serv Res . 2014 ; 49 ( 1 ): 11 – 31 . Crossref, Medline, Google Scholar
14 Gapenski LC . Healthcare finance: an introduction to accounting and financial management [Internet]. Chicago (IL) : Health Administration Press ; 1999 . Online appendix B: operating indicator ratios; [cited 2016 Mar 1 ]. Available from: http://www.ache.org/pubs/hap_companion/gapenski_finance/online%20appendix%20b.pdf Google Scholar
15 Anderson GF . From "soak the rich" to "soak the poor": recent trends in hospital pricing . Health Aff (Millwood) . 2007 ; 26 ( 3 ): 780 – 9 . Go to the article, Google Scholar
16 Bai G , Anderson GF . Extreme markup: the fifty US hospitals with the highest charge-to-cost ratios . Health Aff (Millwood) . 2015 ; 34 ( 6 ): 922 – 8 . Go to the article, Google Scholar
17 Dartmouth Atlas of Health Care . Data by region [Internet]. Lebanon (NH) : Trustees of Dartmouth College ; c 2016 [cited 2016 Mar 1 ]. Available from: http://www.dartmouthatlas.org/data/region/ Google Scholar
18 Robinson J . Hospitals respond to Medicare payment shortfalls by both shifting costs and cutting them, based on market concentration . Health Aff (Millwood) . 2011 ; 30 ( 7 ): 1265 – 71 . Go to the article, Google Scholar
19 Melnick G , Keeler E . The effects of multi-hospital systems on hospital prices . J Health Econ . 2007 ; 26 ( 2 ): 400 – 13 . Crossref, Medline, Google Scholar
20 The Herfindahl-Hirschman Index is the sum of the squared market share of each hospital in the referral region.
21 Brill S . America's bitter pill: money, politics, backroom deals, and the fight to fix our broken healthcare system . New York (NY) : Random House ; 2015 . Google Scholar
22 Harder B . Best hospitals 2015–2016: an overview [Internet]. Washington (DC) : U.S. News & World Report ; 2015 Jul 21 [cited 2016 Mar 1 ]. Available from: http://health.usnews.com/health-news/best-hospitals/articles/2015/07/21/best-hospitals-2015-16-an-overview Google Scholar
23 Olmsted MG , Geisen E , Murphy J , Bell D , Morley M , Stanley M (RTI International; Washington, DC). Methodology: U.S. News & World Report best hospitals 2015–16 [Internet]. Washington (DC) : U.S. News & World Report ; 2015 Jul 15 [cited 2015 Mar 1 ]. Available from: http://www.usnews.com/pubfiles/BH2015-16MethodologyReport.pdf Google Scholar
24 Henry J. Kaiser Family Foundation . Individual insurance market competition . [Internet]. Menlo Park (CA) : KFF ; c 2016 [cited 2016 Mar 10 ]. Available from: http://kff.org/other/state-indicator/individual-insurance-market-competition/ Google Scholar
25 Henry J. Kaiser Family Foundation . State HMO penetration rate . Menlo Park (CA) : KFF ; 2013 Google Scholar
26 The Medicare case-mix index is commonly used to control for overall patient severity. See, for example, Kovner C , Jones C , Zhan C , Gergen PJ , Basu J . Nurse staffing and postsurgical adverse events: an analysis of administrative data from a sample of U.S. hospitals, 1990–1996 . Health Serv Res . 2002 ; 37 ( 3 ): 611 – 29 . Crossref, Medline, Google Scholar
27 To access the Appendix, click on the Appendix link in the box to the right of the article online.
28 Murray R . Hospital charges and the need for a maximum price obligation rule for emergency department and out-of-network care . Health Affairs Blog [blog on the Internet]. 2013 May 16 [cited 2016 Mar 1 ]. Available from: http://healthaffairs.org/blog/2013/05/16/hospital-charges-and-the-need-for-a-maximum-price-obligation-rule-for-emergency-department-out-of-network-care/ Google Scholar
29 Reinhardt UE . The pricing of U.S. hospital services: chaos behind a veil of secrecy . Health Aff (Millwood) . 2006 ; 25 ( 1 ): 57 – 69 . Go to the article, Google Scholar
30 Cuellar AE , Gertler PJ . How the expansion of hospital systems has affected consumers . Health Aff (Millwood) . 2005 ; 24 ( 1 ): 213 – 9 . Go to the article, Google Scholar
31 Williams CH , Vogt WB , Town R . How has hospital consolidation affected the price and quality of hospital care? [Internet]. Princeton (NJ) : Robert Wood Johnson Foundation ; 2006 Feb [cited 2016 Mar 2 ]. Available from: http://www.rwjf.org/en/library/research/2006/02/how-has-hospital-consolidation-affected-the-price-and-quality-of.html Google Scholar
32 Xu T , Wu AW , Makary MA . The potential hazards of hospital consolidation: implications for quality, access, and price . JAMA . 2015 ; 314 ( 13 ): 1337 – 8 . Crossref, Medline, Google Scholar
33 PricewaterhouseCoopers . The health system haves and have nots of ACA expansion [Internet]. New York (NY) : PWC ; [cited 2016 Mar 2 ]. Available from: http://www.pwc.com/us/en/health-industries/health-research-institute/assets/pwc-hri-medicaid-report-final.pdf Google Scholar
34 Moody's . Affordable Care Act's Medicaid expansion linked with decline in US hospitals' bad debt [Internet]. New York (NY) : Moody's ; 2015 Jun 3 [cited 2016 Mar 2 ]. Available from: https://www.moodys.com/research/Moodys-Affordable-Care-Acts-Medicaid-expansion-linked-with-decline-in--PR_326917 Google Scholar
35 Rosenbaum S , Kindig DA , Bao J , Byrnes MK , O'Laughlin C . The value of the nonprofit hospital tax exemption was $24.6 billion in 2011 . Health Aff (Millwood) . 2015 ; 34 ( 7 ): 1225 – 33 . Go to the article, Google Scholar