Investment Income of US Nonprofit Hospitals in 2017
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J Gen Intern Med DOI: 10.1007/s11606-020-05929-5 © Society of General Internal Medicine 2020
overall net income (i.e., total net income generated from operating and non-operating activities) across these hospital groups to understand the impact of investment income on hospitals’ financial position.
INTRODUCTION
Nonprofit hospitals play a primary role in providing hospital services to Americans.1 Their financial viability has important implications for access to hospital care and the competitiveness of the hospital market.2 Nonprofit hospitals often generate investment income—such as interest revenue, dividends, rental income, gain or losses on sale of investment assets—to diversify revenue sources and enhance their financial position.3, 4 To date, nonprofit hospitals’ investment income has remained unexplored in the literature. The recent outbreak of COVID-19 significantly increased the volatility of global financial markets. In this study, we examined the magnitude and distribution of US nonprofit hospitals’ investment income in 2017 and analyzed the implications on hospitals’ financial position. Based on the findings, we discussed the potential impact of financial market volatility on nonprofit hospitals’ investment income and financial viability.
METHODS
2017 Hospital Cost Reports published by the Centers for Medicare and Medicaid Services were used in the analysis, with 2017 being the latest year for which a complete nationwide data set was publicly available online.5 A total of 2590 general short-term nonprofit hospitals located in the USA with non-missing reported net patient revenue were included in the sample. Investment income is one of 18 categories of nonoperating income specified in Cost Reports. Besides the specified non-operating income, hospitals also report unspecified non-operating income. We first examined the composition of specified nonoperating income and the magnitude of investment income relative to other types of non-operating income. Next, we ranked hospitals based on their investment income and examined the shares of investment income across hospital quartiles and for hospitals in the top 1% and 5%. Finally, we compared investment income and Received April 2, 2020 Accepted May 18, 2020
RESULTS
In 2017, all US nonprofit short-term general hospitals reported a $52.6 billion non-operating income, consisting of $34.0 billion from the unspecified category and $18.6 billion from 18 specified categories. Among the $18.6 billion of specified non-operating income, investment income ($8.0 billion) is the dominant category (43%) (Fig. 1). Among the 2590 nonprofit hospitals in our sample, 1684 (65%) reported positive investment income, 842 (33%) reported no investment income, and 64 (2%) reported negative investment income. The top 1% of hospitals with the highest investment income generated 36% of the $8.0 billion of all investment income of the 2590 hospitals (Fig. 1). The top 5% of hospitals’ investment income accounted for 69% of all investment income. The top quartile of hospitals earned a
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