60 things to know about the hospital industry | 2016
Hospitals and health systems in the U.S. are undergoing a dramatic shift in their business models due to a number of forces — from providers concerned with the volume of services they provide, to providers who focus on offering high-value services that emphasize keeping populations healthy. For those unfamiliar with this shifting industry, or those who simply want to know more, here are 60 facts and statistics about the hospital industry in 2016.
1. There are 5,686 hospitals in the U.S., according to the American Hospital Association.1
2. Of these, 2,904 hospitals are nonprofit and 1,060 are for-profit. Additionally, 1,010 are owned by state or local (county, hospital district) government entities.1
3. Of all hospitals in the U.S., 1,971 serve rural communities and are considered rural hospitals.1
4. Of rural hospitals, 1,332 are designated as Critical Access Hospitals by CMS.2 CAHs are rural hospitals with no more than 25 beds and are at least 35 miles (15 miles in areas with mountainous terrain or only secondary roads) away from another hospital. CAHs are paid differently by CMS than traditional acute care hospitals; their payments reflect their operating costs, rather than volumes.
5. Despite the high number of rural hospitals, many of them are at risk of closing. According to September 2015 data, 57 rural hospitals had closed since 2010. An analytics firm called iVantage created and a hospital strength index based on financial stability, patients and quality indicators for 2,224 rural hospitals across the country. iVantage determined 283, or nearly 13 percent, were vulnerable to closure. The vulnerable hospitals are located across 39 states.
6. Although hospital closures immediately raise concern about access to care, the general link between a closed hospital and rates of patient mortality rates may be unfounded, according to study published in Health Affairs. Researchers identified 195 hospital closures in the U.S. between 2003 and 2011 and compared the annual patient mortality rates in hospital service areas with one or more closure with HSAs that didn't experience any hospital closures. They found no significant difference between the mortality rates. In HSAs that experienced at least one hospital closure, the mortality rate dropped from 5.5 percent to 5.2 percent from 2003 to 2011. In HSAs that did not experience a hospital closure, the mortality rate remained the same at 5.4 percent from 2003 to 2011.
7. Academic medical centers are hospitals and health systems with a close affiliation with a medical school. AMCs feature residency and often fellowship training programs and pursue clinical research in addition to direct patient care. They also often are considered tertiary care centers, because of their ability to treat a full range of complex conditions and access to subspecialists. In 2013, the latest year for which data is available, approximately 400 U.S. hospitals were affiliated with a medical school. There are 145 accredited medical schools in the country, according to the Association of American Medical Colleges.3
8. Safety-net hospitals are a category of hospitals that provide a disproportionate level of charity care compared to other facilities.4 These hospitals receive Hospital Disproportionate Share Payments from CMS to help offset the cost of caring for large numbers of Medicaid, Medicare and uninsured patients who result in uncompensated care. The Affordable Care Act calls for DSH payments to be significantly reduced over a period of years. DSH funding began in 2014.
9. U.S. health spending increased by 5.3 percent in 2014 to a total of $3 trillion, according to CMS' Office of the Actuary.
10. In 2014, 100 mergers or acquisitions took place in the hospital industry, worth a dollar value of $62 billion, according to Irving Levin Associates. The number of healthcare sector mergers and acquisitions reached "record-breaking proportions," according to a report from the company.5
11. Of the 100 mergers and acquisitions, 65 involved nonprofit hospital buyers, while 35 involved for-profit hospital buyers.5
12. The five largest for-profit hospital operators include:
- Community Health Systems (Brentwood, Tenn.) — 196
- Hospital Corporation of America (Nashville, Tenn.) — 165
- Tenet Healthcare (Dallas) — 84
- LifePoint Health (Brentwood, Tenn.) — 70, which includes acute care facilities within Brentwood, Tenn.-based Duke LifePoint Health
- Prime Healthcare Services (Ontario, Calif.) — 386
13. The five largest nonprofit hospital systems include:
- Ascension Health (St. Louis) — 129
- Catholic Health Initiatives (Englewood, Colo.) — 102
- Trinity Health (Livonia, Mich.) — 91
- Dignity Health (San Francisco) — 39
- Kaiser Permanente (Oakland, Calif.) — 386
14. The five largest nonprofit hospitals in America (by bed count) are:
- NewYork-Presbyterian Hospital/Weill Cornell Medical Center (New York City) — 2,508
- Florida Hospital Orlando — 2,350
- Baptist Medical Center (San Antonio) — 1,563
- UPMC Presbyterian (Pittsburgh) — 1,548
- Orlando (Fla.) Regional Medical Center — 1,5256
15. The largest for-profit hospitals in America (by bed count) are:
- Methodist Hospital (San Antonio) (affiliated with Methodist Healthcare System) — 1,561
- Edinburg (Texas) Regional Medical Center (affiliated with South Texas Health System) — 816
- Chippenham Hospital (Richmond, Va.) (affiliated with HCA) — 793
- North Shore Medical Center (Miami) — 771
- Henrico Doctors' Hospital (Richmond, Va.) (affiliated with HCA) — 7336
16. Hospitals vary greatly is size, from small rural facilities with just a few key service lines to large, tertiary care facilities. Here is a breakout of U.S. hospitals by bed count in 2012, the latest year for which data is publicly available.7
- 6-24 bed — 462
- 25-29 beds — 1,192
- 50-99 bed — 954
- 100-199 beds — 1,012
- 200-299 beds — 570
- 300-399 beds — 348
- 400-499 beds — 189
- 500 beds or more — 272
17. There was an average of 104 inpatient hospitals admissions per 1,000 people in 2014, down from an average of 111.8 days in 2011. This data suggests on ongoing shift from inpatient to outpatient care, which has been driven largely by advances in minimally invasive surgical techniques as well as advanced anesthesia techniques that allow patients to recover more quickly from surgical procedures.8
18. In 2012, the latest year for which data is available, the average length of stay for an acute care hospital admission was 4.5 days.9
19. The average cost per inpatient day in 2014 was $2,346 for nonprofit hospitals and $1,798 for for-profit hospitals. At nonprofit hospitals, the average cost per inpatient day was highest in California ($3,533) and lowest in South Dakota ($1,321). Among for-profit hospitals, the average cost per inpatient day was highest in New Jersey ($4,656) and lowest in South Dakota ($434).10
20. There was an average of 2,145 outpatient visits per 1,000 people in 2013, up from an average of 2,105.6 days in 2011, further supporting the trend of inpatient surgeries moving to the outpatient setting.10
21. Emergency departments are critical units within hospitals as they account for the majority of inpatient admissions. In 2011, the latest year for which data is available, there were 44.5 ED visits per 100 persons in the U.S., according to the CDC. This translates to roughly 136.3 million visits total that year.
22. Of that total, approximately 40.2 million ED visits were injury-related. The percentage of emergency department visits resulting in hospital admission was 11.9 percent, and the percentage of emergency department visits resulting in a transfer to a different hospital was 2.1 percent.11
23. The term "hospital acquired conditions" includes adverse drug events, catheter associated urinary tract defects, central line associated bloodstream infections, pressure ulcers and surgical site infections, among others. HHS estimated a 17 percent decline in HAC rates from 2010 to 2014, or 2.1 million fewer recorded HAC cases. HHS reported 87,000 fewer patient deaths in hospitals and nearly $20 billion in care cost savings as a result of HAC decrease over this period.
24. "Low-volume hospitals" became a talking point in 2015. When surgeons at a hospital perform a low volume of cases of certain procedures, patients are at a higher risk of suffering death or serious complications than if the surgeons and hospitals have more experience, analysis from U.S. News & World Report found. Last spring, three major academic health systems — Dartmouth-Hitchcock Medical Center in Lebanon, N.H., Baltimore-based Johns Hopkins Medicine and Ann Arbor-based University of Michigan — shared plans to bar member hospitals from performing certain low-volume procedures.
25. The American Hospital Association is the leading association representing U.S. hospitals. It is led by President and CEO Richard (Rick) Pollack.
26. The Federation of American Hospitals represents for-profit, investor owned hospitals. It was founded in 1966 and is led by President and CEO Charles (Chip) Kahn.
27. America's Essential Hospitals represents safety-net hospitals, including many large, urban facilities. It is led by President and CEO Bruce Siegel, MD, MPH.
28. A variety of factors have pressured hospital finances over the last several years, and these forces are unlikely to let up. In addition to the volume shift from inpatient to outpatient visits, the growth in high-deductible heath plans and other health insurance benefit design elements that increase costs for consumers has resulted in some patients delaying or withholding medical care. For 2012, the latest data available, the average operating margin for a nonprofit hospital was 2.6 percent, according to Moody's Investors Service.
29. In 2013, hospitals were underpaid for medical services by $51 billion, according to the American Hospital Association. This total includes shortfalls of $37.9 billion for Medicare and $13.2 billion for Medicaid. That year, under Medicare, hospitals received payment of 88 cents for every dollar spent caring for Medicare patients. Under Medicaid, hospitals received payment of 90 cents for every dollar spent caring for Medicaid patients.
30. In 2014, the average nonprofit hospital had 205.8 days cash on hand and a cash-to-debt percentage of 141.8. However, cash-to-debt ratios vary widely in the industry:
- Median cash-to-debt percentage for "AA-rated hospitals: 201.7
- Median cash-to-debt percentage for "A"-rated hospitals: 143.7
- Median cash-to-debt percentage for "BBB"-rated hospitals: 89.5
- Median cash-to-debt percentage for hospitals rated below "BBB": 52.212
31. The payment a hospital receives for the service it provides varies based on the payer. Governmental payers, including Medicare and Medicaid, set rates, and nearly every hospital chooses to accept them in order to have access to these patients. With commercial payers, hospitals can negotiate rates based on expected volume and other factors; however many commercial rates are set based on a percent of Medicare or some other formula that uses Medicare rates as a baseline figure. Therefore, cuts to Medicare rates may have a larger impact on hospital finances than just among Medicare patients.
32. For 2009, the latest year for which data is available, the majority of patients treated by hospitals are covered by Medicare (40.9 percent of patients treated in U.S. hospitals). The average payer mix of a U.S. hospital is as follows:
- Medicare: 40.9 percent
- Medicaid: 17.2 percent
- Blue Cross Blue Shield, other private insurance: 16.5 percent
- HMO or PPO: 14 percent
- Self-pay: 4.9 percent
- Worker's compensation and other government programs: 2 percent13
33. Nonprofit health systems receive tax-exempt status because of the benefits they provide to their communities. However, there has been greater scrutiny by lawmakers and the public in the past five years as to whether the tax breaks are equivalent to the level of charity care or other benefits provided by the hospitals. As part of the ACA, the IRS has implemented stricter reporting requirements, and many state and local governments are currently evaluating hospital tax breaks. (See: "Hospital Tax Exemptions Under Fire in Illinois" and "NJ Bill Approved to 'Tax' Nonprofit Hospitals.")
34. As part of the ACA, hospitals agreed to roughly $155 billion in payment cuts from Medicare and Medicaid over 10 years. Further, the American Taxpayer Relief Act of 2012, better known as the fiscal cliff deal, brought on further cuts to hospital payment rates. Together, these adjustments will slow the growth of Medicare spending. However, hospitals are not reimbursed a lower rate year-to-year. Instead, growth in Medicare payments are slowed. Under CMS' proposed rule for 2016 payments, acute care hospitals that report quality data and are meaningful users of EHRs will receive a 0.9 percent increase in Medicare operating rates.
35. Various reforms under the ACA have increased the percentage of Medicare payment rates, under the formula CMS uses, that are tied to hospital performance. The ACA implemented the hospital Value-Based Purchasing program, and in 2012, CMS introduced the Hospital Readmissions Reduction program. As the adage goes: "where Medicare goes, so go private payers." Many private payers have entered into various types of value-based contracts with providers. (See No. 33.)
36. The financial impact of these value-based reforms was expected to have a significant impact, particularly on low-performing hospitals. However, in an October 2015 report, the United States Government Accountability Office found the Value-Based Purchasing Program had "modest effects on Medicare payments and no apparent change in quality-of-care trends."14
37. The impetus for value-based care is driven by two core forces: 1) the rising cost of medical care and 2) the lack of predictable quality. Regarding the latter force, medical errors and healthcare-associated infections continue to occur at alarming rates in U.S. hospitals, though they have decreased over the past decade. According to a 2013 study by the CDC15 that examined hospital data from 2011, approximately 721,800 HAIs occur annually. The number of estimated deaths associated with HAIs in U.S. hospitals was 75,000. Of these, 157,500 were for pneumonia, 71,900 for bloodstream infections, 123,100 for gastrointestinal illness, 93,300 for urinary tract infections, 157,500 for surgical site infections and 118,500 for infections of other sites.
38. Hospitals and health systems are entering into a variety of value-based payment models with CMS and private payers. Many value-based agreements with private payers are similar to CMS' VBP program where there are incentives for providing high-quality care that meets certain benchmarks. Others are more complex and may include accountable care organization arrangements, capitated payments for a patient over a set period of time, or bundled payments for certain medical and surgical services.
39. Hospitals face a relentless push to improve the patient experience and support patients as active participants in the care process, when possible, versus passive recipients of care. Since 2006, CMS and the federal government has used Hospital Consumer Assessment of Healthcare Providers and Systems (HCAHPS) as a standardized survey to measure patient perception of the quality of care received. The HCAHPS survey asks discharged patients 27 questions about their recent hospital stay. The ACA includes HCAHPS among the measures to be used to calculate value-based incentive payments in the Hospital Value-Based Purchasing program, which began with discharges in October 2012. In 2015, CMS launched star ratings on its Hospital Compare website as a way to streamline hospital ratings for patients trying to make healthcare decisions. CMS will publish 12 different star ratings on the Hospital Compare website for each facility: 11 of the ratings will be based on individual HCAHPS measures and the 12th is a composite star rating.
40. Accountable care organizations have proven a popular value-based model, at least in terms of systems willing to test their viability. ACOs are one of several programs created by the Center for Medicare & Medicaid Innovation, which was created and funded by the ACA to pilot new patient care models intended to reduce costs and improve quality. CMS created several models for ACOs, including the Medicare Shared Savings Program, the Pioneer ACO program and the Next Generation ACO model. The 21 new Next Gen ACOs — which were announced early this year — will take on more performance risk than ACOs in other models, but they also have the potential to share in greater savings. The CMMI also launched the Bundled Payments for Care Improvement Program, which will pay hospitals a bundled rate for certain hospital-based and outpatient services associated with selected DRGs.
41. ACOs will continue to grow. According to a report from consulting firm Oliver Wyman, there were 522 ACOs in the U.S. in 2014. As of January 2015, the number of ACOs rose to 585.
42. Because of demands to lower costs, improve quality, coordinate care and improve population health, hospitals are concerned with their alignment with physicians. Physicians, after all, control most testing and treatment decisions, and their goals must be aligned with those of the health system for success. To achieve this, health systems look to clinically integrate with physicians, which can be achieved through a variety of models ranging from employment to operating a management service organization for independent physicians.
43. Despite the variety of models available to achieve clinical integration, physician employment has risen in popularity, likely because it eliminates many legal hurdles associated with hospital-physician relationships. According to Medscape's 2015 Physician Compensation Report , 63 percent of physicians are employed.
44. A physician's hesitation to accept employment seems largely driven by a sense of independence (something apparently more common among surgeons) and an ability to maintain income in a private practice setting. Medscape's Physician Compensation Report found employed primary care physicians earn $189,000, while self-employed PCPs make $212,000. Employed specialists make $258,000 a year and self-employed specialists make $329,000 annually.
45. Anticipated physician shortages in certain areas of the country are also driving hospitals' efforts to align with physicians. The Association of American Medical Colleges estimates the U.S. will have a shortage of between 46,000 and 90,400 physicians by 2025.
46. When hospitals employ physicians, they often do so to prepare for managed care and other business purposes. However, hospital leaders should keep in mind physicians are quite expensive to employ, and in fact, increased regulations have made operating physician practices more expensive than in the past. A recent report from Moody's Investors Service found hospitals with a high rate of physician employment showed stronger revenue growth but lower profitability than hospitals with lower employment rates.
47. In 2015, primary care physicians experienced bigger increases in total cash compensation than their specialist peers, according to Sullivan, Cotter and Associates' 2015 "Physician Compensation and Productivity Survey." For example, primary care physicians saw a 3.4 percent median increase in compensation between 2011 and 2015, while medical specialists saw a 2.5 percent increase and surgical specialists saw a 2.3 percent increase.
48. A study from Mayo Clinic in Rochester, Minn., and the American Medical Association found work-life balance among physicians has worsened from 2011 through 2014. In 2011, 45 percent of physicians were considered burned out, and that number grew to 54 percent by 2014. The finding indicates this trend is specific to the medical profession, as work-life balance and burnout remained steady among workers in other fields.
49. In total, healthcare added 474,700 jobs in 2015, according to the Bureau of Labor Statistics. That's more than 2014 (309,000) and 2013 (159,700) combined. Healthcare added an average of 40,000 jobs per month in 2015, compared with an average of 26,000 per month in 2014, according to the BLS.
50. In 2014, 75 percent of hospitals had at least a basic EHR in place. This is nearly five times the amount of hospitals that had a basic EHR in 2010, but this does not mean the EHR meets requirements for meaningful use. Regardless, early this year, CMS Acting Administrator Andy Slavitt said the meaningful use program will end in 2016.16
51. Hospitals that successfully implement electronic health records and are able to demonstrate "meaningful use" of those records — according to CMS' standards — will receive incentive payments. The funding for these incentive payments was allocated by Congress in the American Recovery and Reinvestment Act of 2009.
52. Since the meaningful use program began in 2011, most hospitals across the U.S. have attested to Stage 1. However, over 60 percent of hospitals and approximately 90 percent of physicians haven't attested to Stage 2 yet.16
53. In 2014, the average base salary for an independent health system CEO was $752,800. The average base salary for a CEO of an independent hospital — one that doesn't report to a parent organization — was $425,200, according to Integrated Healthcare Strategies' "2014 National Healthcare Leadership Compensation Survey" report.
54. There was an 18 percent rate of turnover among hospital CEOs in 2014, the most recent year for which data is available, according the American College of Healthcare Executives. While lower than the record high of 20 percent reported for 2013, it was still among the highest rates reported in the last 15 years.
55. For the 11th year in a row, hospital CEOs ranked financial challenges as the No. 1 issue facing their organizations in 2014. The issue topped healthcare reform implementation (No. 2), governmental mandates (No. 3) and patient safety and quality (No. 4). Within the bucket of financial challenges, the 338 CEOs polled by the American College of Healthcare Executives indicated concern among the following subcategories:
- Medicaid reimbursement (69 percent)
- Bad debt (67 percent)
- Decreasing inpatient volume (63 percent)
- Medicare reimbursement (57 percent)
- Competition from other providers (of any type) — 55 percent
56. The average base salary for an independent health system CFO in 2014 was $416,200, while the average base salary for a CFO of an independent hospital was $247,900, according to Integrated Healthcare Strategies' "2014 National Healthcare Leadership Compensation Survey" report.
57. In 2013, the average annual salary for a CIO in healthcare and medical service was $173,941.
58. The average annual salary for a CXO in 2015 was $221,000.
59. The number of hospitals in each state is influenced by population, of course, but also by other factors. State certificate of need laws are one of the biggest influencers of hospital development in a state. Certificate of need laws require that a state-governed board review and approve the development of any new healthcare facilities in the state. Generally, approval requires proof of need — that is, a current lack of access to healthcare services or a future one, due to projected population growth. For a summary of CON laws (or lack thereof) by state, click here.
60. The top five states with the most hospitals, according to Kaiser Health Facts,17 are:
- Texas — 424
- California — 347
- Florida — 212
- Pennsylvania — 190
- Illinois — 189
1. American Hospital Association. "AHA Hospital Statistics, 2015 Edition" which is based on the 2013 AHA Annual Survey.
2. Rural Health Research Centers at the Universities of Minnesota, North Carolina-Chapel Hill, and Southern Maine. "CAH List." Available online at http://www.flexmonitoring.org/cahlistRA.cgi.
3. PWC. "Academic Medical Centers." Available online at http://www.pwc.com/us/en/health-industries/providers/services-solutions/academic-medical-centers.jhtml
4. America's Essential Hospitals. "About Our Members." Available online at http://www.naph.org/Main-Menu-Category/About-NAPH/About-Our-Members/what-is-a-safety-net-hospital.aspx
5. Irving Levin Associates. "Health Care Services Acquisition Report, 2015." Press release available online at http://www.businesswire.com/news/home/20150331006369/en/Newly-Published-Report-2014-Health-Care-Services#.VRv4s-FKZsZ.
6. Figures are based on individual systems' websites as well as CMS cost report data analyzed by American Hospital Directory. Note: The hospital bed counts reported here include all medical/surgical and special care beds as reported to CMS by the hospitals in their most recent cost reports and, in some cases, may include bed counts from other facilities that share a provider number with the main hospital.
7. Centers for Disease Control and Prevention. "Table 98: Hospitals, beds, and occupancy rates, by type of ownership and size of hospital: United States, selected years 1975-2012." Available online at http://www.cdc.gov/nchs/data/hus/2014/098.pdf.
8. Kaiser State Health Facts, 2014. Available online at http://kff.org/other/state-indicator/admissions-by-ownership/.
9. Healthcare Cost and Utilization Project. "Overview of Hospital Stays in the United States, 2012." Available online at http://www.hcup-us.ahrq.gov/reports/statbriefs/sb180-Hospitalizations-United-States-2012.pdf.
10. Kaiser State Health Facts, 2013. Available online at http://kff.org/other/state-indicator/expenses-per-inpatient-day-by-ownership/ and http://kff.org/other/state-indicator/outpatient-visits-by-ownership/.
11. Centers for Disease Control and Prevention. 2011, "National Hospital Ambulatory Medical Care Survey." Available online at http://www.cdc.gov/nchs/fastats/emergency-department.htm and http://www.cdc.gov/nchs/data/ahcd/nhamcs_emergency/2011_ed_web_tables.pdf.
12. Source: Fitch Ratings, "2014 Median Ratios for Nonprofit Hospitals and Healthcare Systems," August 2015. Moody's Investors Service, "U.S. Not-for-Profit Hospital 2014 Medians," Sept. 2015.
13. Centers for Disease Control and Prevention. 2010, "NationalHospital Discharge Survey." Figures reflect payer mixes from 2009, the latest year available.
14. United States Government Accountability Office. 2015, "Hospital Value-Based Purchasing" report. Available online at http://www.gao.gov/assets/680/672899.pdf.
15. Centers for Disease Control and Prevention. "Estimating Health Care-Associated Infections and Deaths in U.S. Hospitals, 2011" Available online at http://www.cdc.gov/HAI/surveillance/.
16. AmericanHospital Association. "Getting Meaningful Use Right" factsheet. Available online at http://www.aha.org/content/14/fs-meaningfuluse.pdf.
17. The Henry J. Kaiser Family Foundation. State Health Facts. Available online at http://kff.org/other/state-indicator/total-hospitals.
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