Background: Health management studies of hospital revenues have tended to focus on patient-service revenues, with little attention to the magnitude and the nature of nonpatient revenues.
Objectives: This study (a) examines the size and sources of nonpatient revenues in hospitals, (b) analyzes the impact of nonpatient revenues on hospital profit margins, and (c) investigates variations in nonpatient revenues by ownership and bed size.
Data and Methods: The data source for this study is the Florida Hospital Uniform Reporting System. The unit of observation is a private, acute care hospital, with the data being averaged over the period 2003-2005 (n = 143). Descriptive statistics and nonparametric tests of differences between groups are the primary methods of analysis.
Findings: During the period 2003-2005, on average, other operating revenues accounted for 1.3% and nonoperating revenues accounted for 4.1% of total revenues, although there was considerable variation across hospitals. Nonpatient activities contributed importantly to hospital profit margins. The average patient care margin was 3.1%, and the average total margin before tax was 4.8%. Thus, without nonpatient activities, total margin before tax would have been 1.7 percentage points lower. Nonpatient revenues tended to be more important for not-for-profit compared with for-profit hospitals, with little differences by bed size.
Practice Implications: The key practice implication is that because nonpatient activities contribute importantly to hospital profit margins, they should constitute a core element in the organization's financial and operational planning. In particular, hospitals should consider treating nonpatient activities as profit centers.
Niccie L. McKay, PhD, is Associate Professor, Department of Health Services Research, Management and Policy, University of Florida, Gainesville. E-mail: firstname.lastname@example.org.
Louis C. Gapenski, PhD, is Professor, Department of Health Services Research, Management and Policy, University of Florida, Gainesville.