By Phil Kerpen
Excerpt from Real Clear Health:
Most of the public anger over the cost of American health care in recent years has been directed toward Congress, the insurance companies, and the pharmaceutical companies – but the latest national health expenditure data shows hospitals are by far the biggest driver of increased health care costs. As a result of government payment, regulatory, and tax policies, hospitals have evolved into enormous integrated “health systems.” Most of these systems are operated as tax-exempt non-profits despite vast commercial activities, eroding federal, state, and local tax bases. Bringing market discipline to bear on these systems is a long overdue frontier for federal tax and health care policy.
Hospital prices have been by far the fastest rising component of inflation over the last two decades, outpacing even university tuition, which is number two. What these sectors have in common is that they are dominated by non-profit, tax-exempt organizations that are not accountable to shareholders and susceptible to market pressures. They have high barriers to entry, and they are heavily subsidized with taxpayer dollars.
A recent report from the Paragon Institute debunks the myth that hospitals are in financial distress. They find that 2024 hospital operating profits averaged 6.4 percent and that many hospitals also had substantial investment income. Marginal profit on Medicare patients in particular was consistently positive, in the range of 5 to 8 percent, in recent years, and because Medicare pays hospitals much more for the same procedures than it pays independent doctors and surgical centers, there has been a massive government-induced provider consolidation in recent years. In 2024, 55 percent of all physicians in the country were employed by hospitals, compared to just 26 percent in 2012.
Read more at Real Clear Health