Non-profit hospitals recognize substantial profits from investments

Why should consumers care? Because costs passed on to you

Many hospitals do not pay taxes because they are classified as “non-profit.” Yet an analysis by Axios, an online news site, finds some so-called “non-profit” hospitals actually turn a healthy profit, particularly when their Wall Street investments, stocks, bonds, credit default swaps, mergers and acquisitions are factored in.

Axios dug into the financial documents of 84 of the biggest not-for-profit hospital systems in the United States. These systems accumulated $535.5 billion in annual revenue, which represents a generous slice overall health care spending.

Caring for patients accounted for about $14.4 billion in profits last year for these systems, which represents a 2.7 percent operating profit margin. However, the total profit margin jumped to a far healthier 6.7 percent or $35.7 billion when investments, mergers and other financial transactions are added.

Why should consumers care?

Research indicates that consolidation has led to higher prices, which leads to higher insurance premiums.

“We don’t have anything close to what most people would see as a functioning, competitive market in hospital care,” Alan Sager, a health policy professor at Boston University, told Axios.

The American Hospital Association countered that hospitals are currently benefiting from a booming stock market and they need a positive cash flow to pay for expensive advances in medicine and their patients’ increasing health care needs.

The Axios findings reflect other studies that show some non-profit hospitals rake in big profits. Check out this special report from Voices for Affordable Health.