Hospital Profits

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In writing this post, I do so knowing full well that there are significant difficulties in the healthcare industry in America. Too many in the United States incur bankruptcy due to medical bills each year. Too many forego recommended treatments whether procedural or via medication each day.

With that background, it should also be noted that the average not-for-profit hospital in the US has a profit margin of approximately 1.5%. For most businesses, a profit margin of 10% is considered acceptable and 20% is considered more ideal. This 1.5% margin can be considered “thin” to say the least. To further put this in perspective, a small to medium size hospital might have a $500 million gross revenue. This means that before paying anything out, $500 million is brought in. With a 1.5% margin, the hospital makes roughly $7.5 million during that year. But I thought the hospital was not for profit?

Absolutely, that money then goes back into a multitude of things. Parts go to raises for staff, part to adding staff positions and a great deal goes to buying new and improved equipment and replacing old equipment that may either be breaking down or outdated. As additional insight, replacing an MRI or CT scanner costs $2-3 million or more. So, while the system is “not for profit”, a “profit” has to be made to allow for growth and continued operations. This “profit” also allows for saving money to be sure the hospital is able to weather any times when normal revenue streams decline.

Again, there are plenty of issues that need to continue to be addressed and, ultimately, solved in regards to our healthcare system. This post is not to diminish those issues but to simply provide additional information as we all continue to talk and debate about ways in which we should approach this issue. If you have any thoughts, questions or concerns, please leave them in the comments.

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