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The Keckley Report

Investor-Owned Hospitals Draw Unflattering Attention in 3 Industry Studies

By June 28, 2021March 1st, 2023No Comments

Investor-owned hospitals play a major role in U.S. healthcare. Per the American Hospital Association, of 5141 U.S. community hospitals, 1233 (24%) are now owned by an investor-owned hospital operator—up from 1013 (18%) a decade prior.

They operate in urban, suburban and rural settings, and pay taxes. The investor-owned hospital playbook is simple: operate efficiently. Deploy capital strategically. Exit unprofitable markets promptly. Optimize revenue and pricing. Avoid fads and trends. Manage relationships with physicians and payers. Meet shareholder expectations. And it’s worked: for example, since January 2021, the profitability of HCA (HCA +26%), Tenet (THC +75%), and Community Health Systems (CYH +114%) have outperformed the overall markets (NASDAQ +11%, Dow +14%, S&P 500 +14%) and analysts think market conditions are favorable for continued financial success.

Investor-owned hospital ownership has been controversial for four decades. In a 1980 editorial, New England Journal of Medicine Editor Arnold Relman warned “this new medical-industrial complex may be more efficient than its nonprofit competition, but it creates the problems of overuse and fragmentation of services, overemphasis on technology, and “cream-skimming,” and it may also exercise undue influence on national health policy.” His consternation centered on ‘upstarts’ like HCA, AMI, Humana, NME, Charter, and Republic. Ironically, of the six, only HCA still runs hospitals today.

It’s a familiar theme. In its December 19, 2011 letter, Becker’s alerted its readers to the “22 Investor-Owned Hospital Companies to Know.” Today, only 9 of the 22 operate hospitals. And this month, several studies have prompted increased attention to the sector.


Johns Hopkins researchers looked at the billing and debt collection practices for the 100 U.S. hospitals with the highest revenues between Jan. 1, 2018, and July 31, 2020. The key finding: these hospitals charged an average of 7 times the actual cost of the care they provided. And 9 of the 100 had average mark-ups of 10 times actual costs: 8 of the 9 are owned by investor-owned systems:

  • Chippenham Hospital (Richmond, Va.): 13 times, Leapfrog safety grade: A

  • Sunrise Hospital & Medical Center (Las Vegas): 12.9 times, Leapfrog safety grade: C

  • Las Palmas Medical Center (El Paso, Texas): 12.5 times, Leapfrog safety grade: A

  • HCA Houston Healthcare Kingwood (Kingwood, Texas): 12.4 times, Leapfrog safety grade: A

  • Riverside (Calif.) Community Hospital: 12 times, Leapfrog safety score: A

  • UPMC Presbyterian (Pittsburgh): 11.9 times, Leapfrog safety grade: A

  • Doctors Medical Center of Modesto (Calif.): 11.8 times, Leapfrog safety grade: A

  • JFK Medical Center — Main (Atlantis, Fla.): 11.5 times, Leapfrog safety grade: C

  • Medical City Dallas: 10.6 times, Leapfrog safety grade: A

Revenue Optimization

Kaiser Healthcare News researchers used 2020 data on trauma-team activation charges, or HCPCS code G0390, to compare the average trauma activation fee of HCA trauma centers versus non-HCA trauma centers. Data came from Hospital Pricing Specialists and Medicare outpatient claims. Highlights:

  • Trauma charges range from Nevada (avg. HCA fee: $53,153 vs. avg. non-HCA fee: $27,507) to North Carolina (avg. HCA fee: $9,187 vs. avg. non-HCA fee: $5,175)

  • The average HCA trauma activation charges is $26,000 in states where the company does business — three times higher than those of non-HCA hospitals.

  • “HCA’s substantially higher charges did not result from patients with especially severe injuries, South Florida University researchers found.”

The analysts noted that HCA had successfully secured trauma designation for more than half of its hospitals in the last 10 years.

Price Transparency

A study by University of Minnesota School of Public Health analyzed compliance with CMS’ Hospital Price Transparency Rule, which went into effect on Jan. 1, requiring hospitals to publish information about the prices they charge for inpatient and outpatient services, as well as the rates negotiated with various private insurers. The sample included 470 hospitals. Findings:

  • 23.7% of hospitals reported all required data elements in a machine-readable format, and 73.5% reported data in a consumer-shoppable format.

  • System affiliated and private, not-for-profit hospitals were more likely to provide data in a consumer-friendly format than independent, public hospitals and investor-owned hospitals.


The role hospitals play in post-pandemic healthcare is certain to get more media attention in coming weeks and investor-ownership will be debated again. The big takeaway from these studies is the fact that hospital policies and procedures implemented relative to their prices, costs and margins are of increased interest to media, academic researchers, insurers, employers and consumers. They’re anxious to understand why hospital spending is increasing at 6% per year and whether a hospital’s ownership by an investor-owned system operator contributes disproportionately to those costs.

That’s the new normal.


P.S. This week, all eyes will be on DC to see if the Senate passes the $1.2 trillion ‘bipartisan’ infrastructure deal that funds transportation, energy, water and telecommunications systems over 8 years. As proposed, $579 billion is additional funding and dynamic scoring will be used to assess the magnitudes of near‐term impacts on economy‐wide spending and the long‐run impacts on productivity. Notably, line items targeting healthcare infrastructure are a modest part of the bill.


“Hospital Stocks’ Rally Points to Post-Covid Growth”; June 24, 2021; Wall Street Journal

“How America’s top hospitals hound patients with predatory billing”; June 16, 2021; Axios

Jay Hancock “In alleged healthcare ‘money grab,’ nation’s largest hospital chain cashes in on trauma centers”; June 14, 2021; Kaiser Health News

Nikpay et al “Taking the Pulse of Hospitals’ Response to the New Price Transparency Rule”; June 19, 2021; Medical Care Research and Review

“Americans Seek Urgent Mental-Health Support as Covid-19 Crisis Ebbs”; June 27, 2021; Wall Street Journal

“During Covid-19, Most Americans Got Richer—Especially the Rich”; June 27, 2021; Wall Street Journal


Covid Fact file: CDC WHO Johns Hopkins

  • U.S.: 33.6 million confirmed COVID-19 cases and at least 603,895 deaths, (Johns Hopkins University).

  • Global totals: More than 181 million cases and more than 3.92 million deaths. (WHO)

  • 54% % of U.S. population has had at least one vaccine dose and 46% (153 million) been fully vaccinated. (CDC.)

  • 7,303 new cases/day in U.S. (CDC)

Coronavirus Resources

Study: Covid-19 Positivity Significantly Higher than Early Estimates

NIH researchers analyzed blood samples in 9,089 adults in the United States who had not been diagnosed previously with COVID-19 between May 10th and July 31st, 2020. Findings:

  • ‘The overall weighted undiagnosed seropositivity estimate was 4.6% (95% CI: 2.6-6.5%) with race, age, sex, ethnicity, and urban/rural subgroup estimates ranging from 1.1% to 14.2%; the highest seropositivity estimates were in African American participants, younger, female, and Hispanic participants, and residents of urban centers.

  • “The estimate of COVID-19 cases in the United States in mid-July 2020, 3 million in a population of 330 million, should be revised upwards by almost 20 million when the percent of asymptomatic positive results is included.”

“Undiagnosed SARS-CoV-2 Seropositivity During the First Six Months of the COVID-19 Pandemic in the United States”; 22 Jun 2021; Science Translational Medicine

Study: Diabetes Increased Significantly Prior to Pandemic

In this serial, cross-sectional study of nationally representative data from 28 143 participants in the National Health and Nutrition Examination Survey (NHANES), the estimated age-standardized prevalence of diabetes increased significantly, from 9.8% in 1999-2000 to 14.3% in 2017-2018. Only 21.2% of adults with diagnosed diabetes achieved all 3 risk factor control goals in 2015-2018, including individualized hemoglobin A1c targets, blood pressure less than 130/80 mm Hg, and low-density lipoprotein cholesterol level less than 100 mg/dL.

Wang et al “Trends in Prevalence of Diabetes and Control of Risk Factors in Diabetes Among US Adults, 1999-2018”; June 25, 2021; JAMA Network

Study: Physician Worked 6% Fewer Hours During Pandemic

Researchers analyzed the Current Population Survey (CPS) basic monthly data from January 2019 to December 2020 interviewing 8 times during a 16-month period. Findings:

  • In January 2019, mean weekly hours worked per week by physicians was 50.8, in March 2020, this decreased to 49.2 hours per week, and in May 2020 (47.5 hours per week. Work hours stabilized in the summer before reaching another low in November. Mean weekly work hours in December 2020 were 47.8, a 6% decrease from January 2019.

  • The percentage of physicians reporting full-time work status declined from 84.17% before COVID-19 to 80.65% during the pandemic, and those who claimed to “still have the same activities” at work declined from 83.90% to 78.00%.

Xiaochu Hu, Michael Dill “Changes in Physician Work Hours and Patterns During the COVID-19 Pandemic”; June 23, 2021; JAMA Network

US Life Expectancy Decreased During Pandemic

Researchers compared mortality data for 17 high income countries in 2010-18 and 2020, by sex, including an analysis of US outcomes by race and ethnicity. Highlights:

  • 2010 and 2018, the gap in life expectancy between the US and the peer country average increased from 1.88 years (78.66 v 80.54 years, respectively) to 3.05 years (78.74 v 81.78 years). Between 2018 and 2020, life expectancy in the US decreased by 1.87 years (to 76.87 years), 8.5 times the average decrease in peer countries (0.22 years), widening the gap to 4.69 years.

  • Life expectancy in the US decreased disproportionately among racial and ethnic minority groups between 2018 and 2020, declining by 3.88, 3.25, and 1.36 years in Hispanic, non-Hispanic Black, and non-Hispanic White populations, respectively.

Woolf et al “Effect of the covid-19 pandemic in 2020 on life expectancy across populations in the USA and other high-income countries: simulations of provisional mortality data”; June 24, 2021; British Medical Journal

Farrah Report: Insurer Profits up During Pandemic

In its “Year-End 2020 Segment Profitability for Health Insurance Business,” Farrah analysts found:

  • At the end of fourth quarter 2020, the average medical expense ratio for the Individual segment was 74.5%, as compared to 79.5% the previous year.

  • The decline in medical expenses pushed the average medical expense ratio for the Employer-Group segment down to 82.8% at the end of 2020 from 84.6% in 2019.

  • For Medicare Advantage, premium growth outpaced increased medical expenses pushing the medical expense ratio down to 82.8% from 85.4% in 2019.

  • An increase of 5.8% in premiums per member per month pushed the medical expense ratio for Managed Medicaid down to 85.8% from 89.4% in 2019.

“Year-End 2020 Segment Profitability for Health Insurance Business”; June 22, 2021; businesswire


Study: 90% of MA Plans do not Offer New Supplemental Benefits to Enrollees

Medicare Advantage (MA) plans are allowed to offer new supplemental benefits to address enrollees’ broader health and social needs that include primarily health-related benefits, such as adult day health services, home-based palliative care, in-home support services, caregiver support, and therapeutic massage, as newly allowable examples in CMS guidance; special supplemental benefits for the chronically ill (SSBCI); and special COVID-19 supplemental benefits. Researchers analyzed MA plan offerings for 2019-2021 plan offerings:

  • 583 of 5754 plans (10.1%) in 2021 offered at least 1 of the new primarily health-related supplemental benefits in 2021 covering 2,231,428 of 22,873,411 beneficiaries (9.8%). Additionally, 1271 plans (22.1%) offered a supplemental benefit specific to COVID-19, such as care packages or face masks, and 637 plans (11.1%) offered SSBCI.

Crook et al “Analysis of Medicare Advantage Plans’ Supplemental Benefits and Variation by County”; June 23, 2021; JAMA Network

Blue Cross Plans Report Lower Admin Costs Decline in Commercial Growth in 2020

Expense growth in 2020 for Blue Cross Blue Shield Plans was sharply lower in 2020 compared to 2019:

  • Total costs per member per month (PMPM) growth declined to a median of 5.2% from 6.6% in the prior year, the slowest growth since 2016.

  • The decline in Account and Membership Administration (representing over 45% of all expenses) fell to growth of 2.7% from 6.0% in 2019.

  • For the 13 continuously participating Plans, per member costs grew at a median rate of 4.0% compared with 7.1% the prior year.

  • Commercial Insured membership declined by a median of 3.9%, commercial ASO /ASC increased by 4.1%.

“Blue Cross Blue Shield Plans’ Administrative Growth Decelerated in 2020”; June 23, 2021; businesswire

Study: Cost Effectiveness Studies for Part D Drugs Lacking

Cost-effectiveness was not studied for 115 of the 250 drugs for which Part D spending was greatest in 2016, the last year for which complete data was available when the study began. Those medicines accounted for 33% of the $146.1 billion in total Part D spending that year,

Of the 135 drugs for which cost effectiveness studies were conducted, only one-fifth were included in studies of more than average quality. Put another way, only one-third of the spending on the top Part D drugs was for medicines included in cost-effectiveness studies of higher quality. And studies that met all the quality metrics were only available for 11% of the entire 250 drugs.

Tisdale et al “Availability of Cost-effectiveness Studies for Drugs With High Medicare Part D Expenditures”; June 18, 2021; JAMA Network


Antitrust Measures against Big Tech Advance in House Committee

The House Judiciary Committee passed 6 bills aimed at reining in Big Tech (Google, Facebook, Apple, Amazon) last week:

  • The American Choice and Innovation Online Act prohibits big platforms from engaging in conduct that advantages their own products or services, or disadvantages other business users, or discriminates among similarly situated business users. (Vote: 24-20)

  • The Augmenting Compatibility and Competition by Enabling Service Switching, or Access, Act would give the Federal Trade Commission extensive new powers to set individualized standards for the tech giants.(Vote: 25-19).

  • Other bills passed address increased fees for corporate merger reviews adding state attorneys general in court proceeding and related procedural changes.

The effort has gained support from the Biden administration, which recently named big tech critic Lina Khan as chair of the FTC, one of two federal agencies that enforce U.S. antitrust laws.

John McKinnon “Google, Facebook Pressure Falls Short as Antitrust Measures Advance in House Committee”; June 24, 2021; Wall Street Journal