U.S. hospitals saw a six-year high in profits during 2004

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Hospitals in this country had a good year in 2004 - with profit margins averaging 5.2 percent that represents a six-year high, according to the American Hospital Association. Increased bargaining capability with insurers, reduced costs and better Wall Street conditions brought up investments.
Profits are up and many hospitals are literally expanding. The hospital industry is seeing the biggest expansion in construction in the last 50 years. As much as $100 billion has been spent in inflation-adjusted dollars over the previous five years for new and improved facilities.

These construction costs did not impact the profit, and in fact once the developments are complete, hospital revenue might go up further, Rick Wade, AHA senior vice president, told USA Today. Nearly 25 percent of hospitals are "in the red," which is a decline of about nearly one-third from previous years, added Wade.

Lisa Goldstein, a senior vice president at Moody's Investors Service, indicated in comments in USA Today that profit margins are benefiting from strong Medicare reimbursements and higher negotiated rates with private insurers; the performance of higher price tag surgeries; solid outpatient profit; and other factors.

Additionally, hospital expenses dropped a couple percentages from 8.1 percent in 2003.

However, perhaps the brighter times are coming to an end? Wade opined that he does not see as good of an outlook for 2005 and 2006. Medicare payment reductions, hurricanes, and an ever increasing federal deficit could take a chunk out of profits for everyone.