Hospital finances: California M.D. analyzes years of hospital data

Filed Under: Costs, Patients, Providers

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The accepted wisdom about hospitals: They accumulate a lot of bad debt that is uncompensated, for care for the uninsured. They spend a lot of money on malpractice insurance. Hospitals are generally not profitable, or are just scraping by.

But much of that accepted wisdom may simply not be true, we learned in an analysis of financial performance of California hospitals from 2003 to 2011, performed by Dr. David Belk, a California doctor who has taken a one-man campaign for cost transparency to a new level.

We’ll let Dr. Belk speak, quoting from his email blast about the analysis:

“Among our findings:
-There were fewer people in California hospitals in 2011 than in 2003.
-Hospitals billed for a total of twice as much in 2011 than in 2003.
-All hospitals in the study forgave just over 2% of what they billed for charity in 2011.
-They lost a total of less than 2% of what they billed to bad debt.
-As much as 75% of the charges in paid bills was adjusted (discounted) by the payer.
-All hospitals spent a combined total of less than 1% of their revenue on malpractice
-Even though California hospitals collected just over 1/4th of what they billed, they made more than $5 billion in profits in 2011.”

The entire report: “This is a study of the annual financial reports for 352 California hospitals from 2003-2011. All relevant data is linked so anyone can check our math. These financial reports are provided by the hospitals themselves.” The report can be found here.

Hospital finances are notoriously murky, and so any kind of transparency is welcome. We haven’t delved into this, but a quick glance shows it to be thorough and revealing, at least at first glance.

The genesis?

“We may … have finally found a way to bring some transparency to the process of hospital finance,” Dr. Belk writes. “We recently discovered a very large data base that contains the complete financial records for all California hospitals going back to 2002. It’s called The Office of Statewide Health Planning and Development (OSHPD) and it posts annual financial reports that are provided by every hospital in California each year (example report).

“In an attempt to untangle the mysteries of hospital finance we decided to use these financial records to determine exactly how much money in health care actually went to all hospitals.”

I’m planning to dive into this; what I saw looked interesting. Welcome your comments!