Several U.S. hospitals rake in huge profits

Twenty-four U.S. hospitals earn 25 cents or more for every dollar they take in, while the average hospital's profit margin is just below zero, concludes a new Forbes survey.

The most profitable hospital in the nation is Flowers Medical Center in Dothan, Ala. The 235-bed hospital recorded a 53 percent operating margin and earned $389 million in net patient revenue. Its parent, Community Health Systems (NYSE: CYH), earned $3.2 billion in net patient revenue for the second quarter of 2010.

The No. 2 spot went to El Paso-based Del Sol Medical Center of the HCA hospital chain (NYSE: HCA), with a 45 percent operating margin. HCA owns 11 out of the 25 most profitable hospitals in the U.S., reports Forbes.

This list--of the most profitable hospitals with 200 beds or more--was based on operating income data that hospitals report to Medicare each year. For the several thousand U.S. hospitals, the median operating margin was negative-0.7 percent last year.

Some attribute the massive profits to hospitals exerting monopoly-like power to overcharge insurers and patients. "Profitability can be as simple as being in a protected market [with little competition] and having lots of privately insured patients," Michael Millenson, a consultant with Health Quality Advisors, told Forbes.

Yet others maintain that hospitals' high profits correspond to efficiency and good quality. "A strategy aimed at quality can result in improved market share, better ability to recruit and retain physicians, lower nursing vacancy/turnover rates, improved financial performance," Lisa Goldstein, the head of healthcare bond ratings at Moody's, wrote in an influential report, notes Forbes.

It remains to be seen whether such huge profits will persist, especially amid the recent drop in patient volumes at hospitals.

For more:
- read the Forbes article
- read this blog post from Forbes