- Acute care hospitals had total margins of nearly 8% in 2016, the highest in more than a decade and above profits for pharmacies, payers and pharmacy benefit managers, according to an analysis from the left-leaning Center for American Progress.
- The report released Wednesday is critical of hospitals, and recommends more scrutiny of consolidation in the sector. "The industry overall remains highly profitable and, after decades of rapid consolidation, exercises tremendous power over payers in many markets," according to the report. "The rise in hospital prices, in turn, continues to drive up premiums and cost-sharing for patients, hitting individuals who have commercial insurance the hardest."
- CAP, which has deep ties to the Democratic party, suggests a number of policy proposals to reduce the cost of hospital care, ranging from bipartisan and relatively noncontroversial ideas such as banning surprise billing and increasing transparency to far more aggressive plans such as reference pricing and capped reimbursement rates.
The report comes as Democrats vying for president in 2020 are set to debate Wednesday and Thursday, with healthcare high on the agenda.
As the country's healthcare costs continue to rise faster than inflation, various parts of the industry are pointing fingers at each other. Pharma often gets flak for soaring drug costs, but, as issues like surprise billing have gotten more attention hospitals have also found themselves subject to scrutiny.
The analysis showed pharmaceutical manufacturers with the highest margins at 26%; medical devices followed at 12%.
The American Hospital Association did not immediately respond to a request for comment on the CAP report, but the group has previously pushed back on efforts to call out hospitals as a main driver of healthcare costs. Earlier this year, a Health Affairs report found that hospital prices for inpatient care have grown substantially faster than physicians prices.
AHA found fault with that study's methodology, saying it "used limited data to draw broad conclusions."
The CAP report found varying margins across types of hospitals. For-profits had the highest total margins at 11% while nonprofit hospitals margins were 7% and public hospitals were at 5%. It also notes that not all facilities have healthy balance sheets.
"Experiences among individual hospitals vary, however, and about one-quarter of both for-profit and not-for-profit hospitals lost money in 2016," according to the report.
The analysis also takes aim at hospital consolidation, which has been shown to lead to increased costs. Regulators have taken a closer look at proposed M&A recently, however, with several states imposing conditions on horizontal deals.
Some of the think tank's suggested policy fixes are already being seriously discussed in Washington. A number of draft bills in the Senate and House would ban surprise billing, although they differ in key aspects of how out-of-network providers would be paid and how disputed would be settled.
And the White House this week made a big push for more price transparency with an executive order that directs HHS to draft rules requiring hospitals to make public information based on privately negotiated rates with payers, a policy thoroughly opposed by most in the industry.
Hospitals would also oppose other ideas CAP put forward, such as rate setting. The report also pushes for site-neutral payments for hospital-owned outpatient offices, which CMS included in a recent payment rule. Hospitals groups have sued to stop implementation of the rule.