A comparative analysis of revenue and cost-management strategies of not-for-profit and for-profit hospitals.

Abstract

Not-for-profit (NFP) and for-profit (FP) hospitals were compared on several performance indicators including revenues, costs, productivity/efficiency, and profitability. The indicators were adjusted, where appropriate, for outpatient activity and a case-mix index for all patients. FP hospitals had higher profit margins as well as higher gross and net revenues per case-mix adjusted admission. On the other hand, NFP hospitals had lower total cost per case-mix adjusted admission even after subtracting taxes from FP hospital costs. There were no significant differences between the two groups on efficiency and productivity indicators--paid hours per case-mix adjusted admissions, occupancy levels, and case-mix adjusted ALOS. The higher profits of FP hospitals were attributed to revenue management rather than cost and efficiency management.