Unbiased Analysis of Today's Healthcare Issues

Hospital Trends

Written By: Jason Shafrin - May• 17•06

The structure of hospital care has been changing rapidly over the past few decades. The first item to note is that the number of nonprofit hospitals is decreasing. For-profit hospitals are making up a larger percentage of all hospitals than in 1980. Below, table 1 shows the number of hospitals in the United States. I did not break out the government hospitals separately but they exhibit a similar declining trend like the nonprofits.
Table 1Number of Hospitals

1980 1990 1999 2000
All Hospitals 6965 6649 5890 5810
Nonprofit 3322 3191 3012 3003
For-profit 730 749 747 749

If we examine the number of beds the trend remains strong.

Table 2Beds (in thousands)

1980 1990 1999 2000
All Hospitals 1365 1213 994 984
Nonprofit 692 657 587 583
For-profit 87 102 107 110

While it is true that for-profits are taking up a larger share of the market, it is evident that the number of total hospitals and hospital beds is decreasing. Below, we can see that occupancy rates, admissions, and lengths of stay are all decreasing. Do people simply need fewer medical services in recent years? The obvious answer is: No. We see a trend in the last row of Table 3 that outpatient visits have increased dramatically. One may worry that the trend of hospital consolidation would increase the hospitals’ market power, but if each hospital faces competition from outpatient services, one should not worry that hospitals we monopolistically increase price.

Table 3

Occupancy Rate 75.6% 66.8% 63.4% 66.1%
Admissions/ 1000 pop 159 125 119 120
Average length of stay 7.6 7.2 5.9 5.8
Outpat. visits/ 1000 pop 890 1208 1817 1894

Data from: Folland, Goodman, and Stano, The Economics of Health and Health Care, 4th ed., Pearson Prentice Hall, 2004, p. 306.

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  1. Rational Actor says:

    There is some missing data (which may not be available) — has there been a shift in delivery of outpatient services from providers unaffiliated with acute care hospitals to providers who are affiliated with acute care hospitals? I don’t know how the landscape breaks down for surgery centers overall, but there are definitely some that are partnerships between hospitals, docs and third parties. The same goes for o/p imaging services.
    Also, there are some services that clearly can not be provided by the outpatient provider. For these services, the argument in your final sentence would seem to be irrelevant.
    In general, I don’t think that pure monopoly pricing is an issue; it is more one of oligopoly pricing, combined with a system that forces people into poorly designed insurance plans by virtue of the significant “discounts” off of gross charges that are offered to the insurers. but not the individual….

  2. […] 1990 and 2000, the number of hospitals contracted from 6,649 to 5,810 (net decrease of 839) as the number of mergers and acquisitions peaked in 1997 at 310.  Hospital […]