Hospitals
SIC 8060
NAICS 622
This article covers organizations that provide diagnostic services, extensive medical treatment including surgical services, and other hospital services, as well as continuous nursing services. These establishments have an organized medical staff, inpatient beds, and equipment and facilities to provide complete health care. Specialized group industries include the following: general medical and surgical hospitals; psychiatric hospitals; and specialty hospitals such as those for alcoholism rehabilitation, children, cancer, orthopedics, chronic diseases, and drug addiction.
The global universe of the hospital industry consists of an estimated 100,000 hospitals. While the world's hospitals differ considerably in structure, organization, and services, as well as in purpose and mission, they all strive to fulfill the curative, preventive, and educational health needs of the world's population. Health centers, clinics, and other structures are considered "hospitals." In many parts of the world; however, the hospital industry generally adheres to World Health Organization (WHO) standards distinguishing hospitals as permanent facilities offering inpatient services and/or nursing care and staffed by at least one physician. In the United States, hospitals are operated by government agencies, not-for-profit organizations, and for-profit corporations.
Generally, the quality and extent of hospital care correlates positively with the percentage of a country's gross domestic product (GDP) expended for health care. According to the World Health Organization (WHO), expenditures for health care increased from 3 percent of the global GDP in 1948 to 14 percent in 2004. In less affluent countries, availability of hospital beds varies greatly depending on national factors other than GDP, such as type of government and demographics. Further, a WHO study done in 2000 looked at performance—how much was being done with the available resources. When analyzed this way, the U.S., which had spent the highest percentage of its GDP on health care, only ranked 37th in terms of performance.
In the United States, the overall cost of health care escalated rapidly beginning in the 1970s, rising more than US$1 trillion for the first time in 1996, an average of US$3,759 per person, and at least 10 times the amount spent in the early 1970s. Modern Healthcare reported a trend of runaway inflation in the cost of hospital services. The U.S. Department of Labor's Consumer Price Index for medical care showed that prices for health care increased 4.7 percent in 2001, after rising 4.2 percent in 2000. Prices for hospital services rose 7.6 percent in 2001, their biggest increase since 1993. A September 2001 report released by the Center for Studying Health System Change indicated that expenditures for health care increased by 7.2 percent in 2000, the largest increase in 10 years. In its 2004 report, the AHA indicated that healthcare expenditures totaled $1.5 trillion in 2002, with hospitals representing $486.5 billion of this amount. In February 2004, Health Care Strategic Management noted that profit margins for U.S. hospitals saw a slight increase in 2002, based on AHA data. That year, hospitals realized an aggregate profit margin of 4.3 percent, up from 4.1 percent the previous year.
The most widely used distinction of hospitals is based on sponsorship or ownership by organizations described as voluntary and non-profit, governmental or public, and for-profit, private or proprietary. In the United States, the total number of hospitals has fallen steadily since 1980; concurrently, the percentage of hospitals operated by for-profit corporations escalated in the 1990s. According to the 1997 Statistical Abstract of the United States, there were a total of 6,580 U.S. hospitals, compared to 7,051 in 1980.
The hospital industry, similar to other industries, continued to flex from the recessionary conditions of the early 1990s. Rather than wait for inevitable changes mandated by legislation or more adverse circumstances, most hospitals restructured to implement the most effective cost-cutting mechanisms. According to a survey by the American Hospital Association (AHA), the primary U.S. hospital advocate, a potentially viable restructuring route for nearly 11 percent of the nation's community hospitals involved participation in health networks. Networking was described as a group of hospitals, physicians, insurers, and/or community agencies working together to deliver a broad spectrum of health services designed to eliminate duplication of services and achieve better integration of care among community providers. Networks also operated as proprietary hospitals owned by physicians (individuals or group) or owned and controlled by corporate investors. Hospitals were also teaming up with physicians in various types of integrative arrangements, such as physician-hospital organizations (PHOs), independent practice associations (IPA), management services organizations, medical foundations, and hospital-owned or joint hospital physician-owned group practices. The less formal arrangement offered by physician-hospital networks allowed hospitals and physicians greater flexibility because of less legally binding structures.
In the early 1990s, several territorially controlled hospital services shifted to external organizations arranged through joint venture or other contractual agreements. The AHA's 1993 data listed the most frequently shifted services delivered through these arrangements as hospices, home health, and psychiatric services. Consequently, the precipitous drop in hospital inpatient activity was buffered by an increase in ambulatory outpatient services. Treatments and procedures routinely requiring an inpatient stay in the early 1980s were performed as outpatient procedures at a much lower cost in the early 1990s. Facilities such as Duke University in the United States realized as much as US$60,000 savings per patient costs by shifting more treatment to outpatient clinics. For example, bone marrow transplants, one of several treatments traditionally requiring long-term inpatient care, appeared adaptable to outpatient treatment modality. Medical experts had some doubts as to whether outpatient services adequately filled the gap in health care or created more critical treatment gaps. In cases involving outpatient treatment of chronically ill cancer patients, for example, the issue was whether hospitals would have immediate access to patient information in case of an emergency inpatient admission.
Estimated figures for 1992 indicated 33.2 percent of hospitals' net patient revenue was attributed to outpatient services with 43.5 percent of the hospitals' net surgical revenue produced by outpatient surgery. With the exception of teaching hospitals, practically all U.S. community hospitals, regardless of size or location, provided some type of ambulatory surgical service. Less demand for ambulatory care occurred in teaching hospitals because of their heavy reliance on inpatient, tertiary care. One mid-1990s survey of hospital CEOs predicted that, by the year 2000, outpatient services on the average would account for nearly half of hospitals' net patient revenues.
In the United States in 2003, there were 5,764 registered hospitals (7,569 hospitals according to the U.S. Census of 2003) of which 4,895 were community hospitals. Of these, 2,984 were operated by non-government, not-for-profit organizations, 790 were investor owned (for-profit), and 1,121 were run by state or local governments according to American Hospital Association. Community hospitals were open to the public and, in many instances, they bore the brunt of economic defaults primarily because these hospitals more often served as the only "refuge for the poor and ill." From the 1980s through the 1990s, there was an ongoing decline in the number of community hospitals in the United States; in 1980 there had been 3,547 hospitals operated by not-for-profit organizations. In 1993, for example, 34 hospitals closed, approximately 18 merged, and others were absorbed by various structures. More than half of the community hospital closures occurred in larger urban hospitals averaging 200 to 300 beds, which contributed to a 10-year loss of 99,000 hospital beds. New facilities and reopenings possibly offset the void of hospital reductions, but fewer substitutions compensated for the losses of rural hospitals. A relatively small increase in admissions in 1997 failed to balance the chronic admission loss that began in the 1980s.
Hospitals, particularly in rural areas of developing countries, operated under the umbrella of a district health system. These systems included local health centers that were capable of delivering a variety of curative, preventive, and educational health services. A typical rural health district in Africa served about 160,000 inhabitants with approximately 140 beds, three physicians, and 10 peripheral health units. Each district hospitalized about 4,000 patients annually. Few of these health centers maintained laboratory, X-ray, or surgical facilities. In terms of primary care, health centers or stations were designated as initial referral...
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