BALTIMORE, May 3 (UPI) -- Most hospitals lose money on patient services, especially non-profits, but a new study found seven of the 10 most profitable hospitals in the United States are non-profits, confounding researchers who wrote it.
The top four most profitable hospitals in the country are non-profit, making more than $200 million in profit in 2013, leading the researchers to question what these institutions are doing differently while raking in so much cash.
More than half of all hospitals incur losses in the patient services portion of their businesses, but they, like others, make up the difference with investments, donations, tuition and renting office space, among other sources of income.
The researchers found community monopoly for services, allowing hospitals to charge high rates to private insurers, helps hospitals jack up their prices.
Medicare and Medicaid, which are currently testing ways to reduce the cost of primary care, drug costs and some surgical procedures, have also long operated on a fee-for-service system, where doctors and facilities get paid based on tests and procedures -- leading many to order more of both based as much on patient health as on the extra payout, researchers say.
"All hospitals should make a little profit," Dr. Ge Bai, an assistant professor of accounting at Washington and Lee University, said in a press release, "but some hospitals are obtaining outrageous profits."
For the study, published in the journal Health Affairs, researchers reviewed hospital financial records for about 3,000 hospitals in 2013.
Of the facilities they analyzed, 59 percent were non-profit, 25 percent were for profit and 16 percent were publicly owned. The hospitals were ranked based on net income from patient care services, and researchers ignored profit made from all other sources, ranging from investments and donations to parking fees and the hospital cafeteria.
Overall, the median hospital lost $82 per patient, with 45 percent identified as profitable and 2.5 percent making more than $2,475 per discharged patient. The most profitable hospital, the non-profit Gundersen Lutheran Medical Center, made $4,241 per patient.
In their report, the researchers ranked the top ten hospitals' profits for patient services: Gunderson Lutheran Medical Center made $302.5 million; Sutter Medical Center made $271.9 million; Stanford Hospital and Clinics made $224.7 million; Norton Hospital made $211.2 million; Medical City Dallas Hospital made $210.3 million; Swedish Medical Center made $192.5 million; Hospital of the University of Pennsylvania made $184.5 million; Methodist Hospital made $172.4 million; Sacred Heart Medical Center made $171.2 million; and Carle Foundation Hospital made $163.5 million.
Of those, Gunderson, Sutter, Stanford, Norton, the University of Pennsylvania, Sacred Heart and the Carle Foundation Hospital are all non-profit.
The researchers say that, overall, for-profit hospitals have higher markups, are affiliated with larger medical systems or have regional power and tend to be more profitable. In general, they report, hospitals with a larger footprint -- either because they have a bigger network of facilities or treat more people -- also tended to make more money, regardless of their non-profit status.
Changes to Medicare and Medicaid payouts, the shifting health insurance marketplace and other regulatory action by the government may change some profit margins, but the researchers say it is more likely other hospitals will simply rise to the top of any new system.
"A small subset of nonprofit hospitals are earning substantial profits," said Dr. Gerard Anderson, a professor in the Department of Health Policy and Management at Johns Hopkins University. "Either they're doing something right or they are taking advantage of a flawed payment system. Perhaps the most important question is what are they doing with all of that money?"