The Business of Healthcare Overview That You Don’t Want to Miss

April 27, 2017 Phil C. Solomon

Interesting Facts About The Business of Healthcare

If you have a question about the hospitals and the healthcare industry, you will probably find the answer here.  This article will give you some interesting facts about the industry in 2017.

Healthcare makes up a large part of the Gross Domestic Product (GDP) in the US.  It is a monetary measure of the market value of all goods and services produced in a year is a primary indicator used to gauge the health of a country’s economy.  Healthcare’s economic system has a profound effect on business in America.

Healthcare spending increased 5.8 percent in 2015 to a total of $3.2 trillion, according to CMS’ Office of the Actuary.  Healthcare spending accounted for 17.8 percent of the (GDP) in 2015, up from 17.4 percent in 2014.  Compare that to healthcare spending in 1960, when the GDP was 5.2 percent and where total spending was just $27.5 billion. When broken down to the individual consumer level, between 1960 and 2014, healthcare spending in the United States increased from an average of $146/person per year to $9,532 (by 65 times).  Things have changed quite a bit in 55 years.  These statistics demonstrate just how big an impact healthcare has on the country’s economy.


Healthcare Spending Defined

It is made up of all monies paid to health care providers—hospitals, outpatient centers, Veterans Affairs, doctor and dentist practices, physical therapists, nursing homes, home health services and on-site care at places such as schools and work sites.

Also, retail sales of prescription and nonprescription drugs, premiums paid to health insurers, and revenues of makers of medical devices, surgical equipment, and durable medical equipment.  Spending also includes the escalating amounts paid by consumers for out-of-pocket payments for insurance premiums, deductibles, and co-payments, along with costs not covered by insurance.

Hospitals by the Numbers

The American Hospital Association (AHA) conducts an annual survey of hospitals in the US.  The data below contains a sample of statistics from the 2015 AHA Annual Survey.  The AHA is the industry’s complete source for aggregate hospital data and trend analysis.  The data below encompasses information about for-profit and not-for-profit hospitals.


  Total Number of All U.S. Registered * Hospitals 5,564
         Number of U.S. Community ** Hospitals 4,862
               Number of Nongovernment Not-for-Profit Community Hospitals 2,845
               Number of Investor-Owned (For-Profit) Community Hospitals 1,034
               Number of State and Local Government Community Hospitals 983
        Number of Federal Government Hospitals 212
        Number of Nonfederal Psychiatric Hospitals 401
        Number of Nonfederal Long Term Care Hospitals 79
        Number of Hospital Units of Institutions
(Prison Hospitals, College Infirmaries, Etc.)
  Total Staffed Beds in All U.S. Registered * Hospitals 897,961
        Staffed Beds in Community** Hospitals 782,188
  Total Admissions in All U.S. Registered * Hospitals 35,061,292
        Admissions in Community** Hospitals 33,260,348
  Total Expenses for All U.S. Registered * Hospitals $936,531,524,400
        Expenses for Community** Hospitals $851,514,523,144
  Number of Rural Community** Hospitals 1,829
  Number of Urban Community** Hospitals 3,033
  Number of Community Hospitals in a System *** 3,198
  Number of Community Hospitals in a Network **** 1,677

The following includes excerpts from Becker’s Hospital Review report: 50 things to know about the hospital industry in 2017, US News & World Report Best Hospitals Rankings and Statista’s Statistics and Facts about US Physicians.

Hospital Mergers and Acquisitions (M&A) and the Hospital Marketplace

Combined M&A activity experienced a reduction in 2016 compared to 2015.  There were 102 hospital transactions announced in 2016 compared to 112 in 2015.  The mergers and acquisition activity seems fitting because many healthcare organizations have concerns about their financial viability in the marketplace.

Of the 102 reported mergers and acquisitions, 75 involved nonprofit hospitals and 27 involved for-profit hospital buyers.

The five largest for-profit hospital operators, based on the number of hospitals, include:

  • Hospital Corporation of America (Nashville, Tenn.) — 169
  • Community Health Systems (Brentwood, Tenn.) — 158
  • Tenet Healthcare (Dallas, Texas.) — 79
  • LifePoint Health (Brentwood, Tenn.) — 72
  • Prime Healthcare Services (Ontario, Calif.) — 44

The five largest nonprofit hospital systems, based on the number of hospitals, include:

  • Ascension Health (St. Louis, Mo.) — 141
  • Catholic Health Initiatives (Englewood, Colo.) — 103
  • Trinity Health (Livonia, Mich.) — 92
  • Baylor, Scott & White (Dallas, Texas) — 48
  • Adventist Health Systems (Altamonte Springs, Fla.) — 46

The top five states with the most hospitals, according to Kaiser Health Facts, are:

  • Texas—404
  • California—342
  • Florida—210
  • Illinois—188
  • Pennsylvania—186

The following health systems own the short-term acute care hospitals in the United States.  They are:

  • HCA (Nashville, Tenn.) —167
  • Community Health Systems (Franklin, Tenn.) — 149
  • Department of Veterans Affairs (Washington, D.C.) — 141
  • Ascension Health (St. Louis) — 84
  • Tenet Healthcare (Dallas) — 62

Top Hospitals in the US

For 27 years, US News & World Report has published its best hospitals rankings to help patients make informed health care decisions.  They compared nearly 5,000 medical centers nationwide in 25 specialties, procedures and conditions.

This year, the Mayo Clinic led the field as the number one rated hospital in the country.  Below is a listing of the top 20 hospitals in 2016-2017.

  1. Mayo Clinic, Minnesota
  2. Cleveland Clinic, Cleveland
  3. Massachusetts General Hospital, Boston
  4. Johns Hopkins Hospital, Baltimore
  5. UCLA Medical Center, Los Angeles
  6. New York-Presbyterian University Hospital, New York
  7. UCSF Medical Center, San Francisco
  8. Northwestern Memorial Hospital, Chicago
  9. Hospitals of the University of Pennsylvania-Penn Presbyterian, Philadelphia
  10. NYU Langone Medical Center, New York
  11. Barnes-Jewish Hospital/Washington University, St. Louis
  12. UPMC Presbyterian Shadyside, Pittsburgh
  13. Brigham and Women’s Hospital, Boston
  14. Stanford Health Care-Stanford Hospital, City of Stanford
  15. Mount Sinai Hospital, New York
  16. Duke University Hospital, Durham
  17. Cedars-Sinai Medical Center, Los Angeles
  18. University of Michigan Hospitals and Health Centers, Ann Arbor
  19. Houston Methodist Hospital, Houston
  20. University of Colorado Hospital, Aurora

Hospital and Clinical Expenditures

Hospital expenditures increased by 4.1 percent to $971.8 billion in 2014, up from the 3.5 percent growth in 2013, according to CMS.  Physician and clinical services expenditures rose 4.6 percent to $603.7 billion in 2014, higher than the 2.5 percent growth rate in 2013.

Payments and Revenue

The average cost per inpatient day in state/local government hospitals across the U.S. was $1,974 in 2014, the latest year for which data is available, according to Kaiser State Health Facts. The average cost per inpatient day was $2,346 in nonprofit hospitals and $1,798 in for-profit hospitals.

For 2012, the latest data available, the average operating margin for a nonprofit hospital was 2.6 percent, according to Moody’s Investors Service.

In 2015, government payers underpaid hospitals for medical services by $57.8 billion, according to the American Hospital Association.  That year, under Medicare, hospitals received payment of 88 cents on the dollar for time spent caring for Medicare patients.  Under Medicaid, hospitals received payment of 90 cents for every dollar for Medicaid patients.

From 1990 through 2015, US hospitals’ uncompensated care costs totaled $704.7 billion, according to a recent American Hospital Association report.  From 2000 to 2015, National uncompensated care costs reached a high of $45.9 billion in 2012, which represented 6.1 percent of total expenses.  In 2015, total uncompensated care costs were $35.7 billion, representing 4.2 percent of total expenses—the lowest level in 26 years.

A greater number of hospitals and health systems are engaging in alternative payment models with the goal of fully transitioning to a value-based care reimbursement system.  Nationally, hospitals reported about 50 percent of reimbursement relate to a form of value measurement in 2016, up 4 percent from 2014.  Of hospitals involved in value-based contracts, 22 percent reported meeting their goal to reduce administrative costs, 26 percent reported meeting goals to reduce healthcare costs, 30 percent reported meeting care coordination goals and 40 percent reported meeting goals for improving patient outcomes.

Physicians in the US

In 2015, there were 809,845 active doctors of medicine in the US.  This figure included approximately 150,000 inactive and some 50 unclassified physicians.  Washington DC, Massachusetts and Maryland have the highest number of physicians per civilian population.  Among specialists, psychiatrists are the most prevalent physicians.  Roughly, one-quarter of all active physicians is educated abroad.

Compensation for physicians varies across specialties.  Orthopedics and Cardiology include the highest-earning physicians with salaries of $440,000 and $410,000 annually.  The highest-paid physicians live in the north-central part of the country, where the mean compensation is near $300,000 per year.

Even with high earning potential, there are physician shortages in certain areas of the country.  The Association of American Medical Colleges (AAMC) estimates that the US physician shortage will be as high as 94,700 by 2025.

Physician shortages are anticipated to come from three broad categories: primary care, medical specialties, and surgical specialties.  By 2025, AAMC estimated a shortfall of between 14,900 and 35,600 primary care physicians.  Non-primary care specialties many also experience a shortfall as high as 60,300 physicians.

One area that affects physicians is burnout.  It has become increasingly prevalent among US physicians.  Nearly 50 percent of physicians reported frequent or constant feelings of professional burnout in the past year, according to a 2016 survey by Merritt Hawkins.  Physicians who experienced burnout attributed their job dissatisfaction to two major sources: EHR data entry and increased clerical requirements under ICD-10.  There is a good reason for their concerns.  On average, 50 percent of their time is spent entering data into Electronic Health Records and completing clerical work.  They spend only 27 percent of work hours interacting with patients, according to a 2016 study in Annals of Internal Medicine.


Delivering healthcare is “not what it used to be.”  There have been major business model changes over the past 20 years as we have moved from lower cost insurance plans, to volume-based care and recently towards value-based and patient-centric care.

Increasing health insurance premiums and out-of-pocket patient liability have put a strain on patients, physicians, and the entire healthcare system.  These changes have left the public and policy makers wondering how health reform is going to affect the industry in the future.  With our aging population, costs increases and the American Health Care Act implementation, it is anyone’s guess what new challenges the country will face.  Many believe there is light at the end of the tunnel.  Many are skeptical of that.  No matter what people think, everyone can agree on one thing; they hope the light isn’t an oncoming train.


Phil C. Solomon is the publisher of Revenue Cycle News, a healthcare business information blog and serves as the Vice President of Global Services for MiraMed, a healthcare revenue cycle outsourcing company.  As an executive leader, he is responsible for creating and executing sales and marketing strategies which drive new business development and client engagement. Phil has over 25 years’ experience consulting on a broad range of healthcare initiatives for clinical and revenue cycle performance improvement.  He has worked with industry’s largest health systems developing executable strategies for revenue enhancement, expense reduction, and clinical transformation. He can be reached at

The post The Business of Healthcare Overview That You Don’t Want to Miss appeared first on REVENUE CYCLE NEWS.

Previous Article
Administrative Burden of EHRs Opens Doors to Medical Scribes
Administrative Burden of EHRs Opens Doors to Medical Scribes

A physician’s responsibility is to provide the best possible care for sick patients.  A key for delivering ...

Next Article
American Health Care Act Update Review
American Health Care Act Update Review

The House proposal to “repeal and replace” the Affordable Care Act (ACA), the landmark and controversial le...