Rice University’s Baker Institute for Public Policy has issued a new report on hospital finances. The report, entitled Prices Versus Costs: Unpacking Rising US Hospital Profits, compares “the commercial operating costs, net patient revenue from commercial patients, and commercial operating profits of hospitals with different price levels to examine if higher prices are charged to cover higher costs, or instead to generate higher profits.”

They concluded:

“We find that belonging to the highest inpatient price quartile is associated with 17% higher costs per adjusted discharge and 36% higher commercial revenue per adjusted discharge. These differences result in a 69% higher commercial operating profit per adjusted discharge for the highest priced hospitals compared to those in the lowest price quartile. Similarly, hospitals in the highest price quartile for outpatient prices have 2%, 24%, and 66% higher commercial operating costs, revenue, and profits per adjusted discharge, respectively, compared to hospitals in the lowest price quartile.

“Hospitals with higher inpatient prices may have marginally higher costs than lower-price hospitals, they also earn substantially higher commercial revenues per adjusted discharge, leading to higher profits. Hospitals with higher outpatient prices earn significantly higher profits compared to those with lower prices. Meanwhile, higher outpatient prices are not associated with higher operating costs in our sample. 

“Furthermore, our results suggest that high prices are not simply a response to high operating costs; rather, they are associated with larger hospital operating profits. To promote affordability in the health care system, negotiated rates for health services should remain a priority for policymakers.”

World Health Systems Facts is a project of the Real Reporting Foundation. We provide reliable statistics and other data from authoritative sources regarding health systems and policies in the US and sixteen other OECD member nations.

Page last updated September 11, 2024 by Doug McVay, Editor.