Higher commercial-to-Medicare rate ratios increases hospital profitability, study finds

Higher commercial-to-Medicare price ratios were associated with higher profit margins and more days of cash on hand for hospital systems, a study published Feb. 10 in JAMA Health Forum found. 

The study, led by researchers at the Washington, D.C.-based Urban Institute and Boston-based Harvard T.H. Chan School of Public Health, compared financial audit data from 156 health systems in 2018. 

The researchers found that a 1-unit increase in the ratio for commercial payer to Medicare prices for inpatient services led to a 21.3 percent increase in days of cash on hand and a 2.7 percentage point increase in operating margins. 

The study's findings "provide evidence against the claim that relatively higher commercial prices are primarily used to offset losses from public payers rather than to increase profits and liquidity," the authors wrote. 

Read the full study here. 

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