Study: Medical City Dallas Is The Fifth Most Profitable Hospital in U.S.

Medical City's Dallas Campus
Medical City’s Dallas campus.

Medical City Dallas is the fifth most profitable hospital in the country, notching average charges of $7.70 for every $1 in patient care cost incurred, according to a recent study published in Health Affairs.

Using revenue data filed with the Centers for Medicare and Medicaid Services, Johns Hopkins University researchers Ge Bai and Gerard Anderson ranked the 100 most profitable hospitals in the U.S. The data, from 2013, included about 3,000 hospitals: 59 percent nonprofit, 25 percent for-profit, 16 percent public. The median markup charged by hospitals for every dollar incurred was $5.40. They then grouped the top 100 in an Excel spreadsheet.

In 2013, Medical City recorded a net profit of $210,347,536, the study found. The only other North Texas hospital to make the top 100 was also part of HCA North Texas: The Medical Center of Plano ranked 65th, posting a profit of $76,766,064. In an interview, Bai said the facilities are required by CMS to report their complete financial information, not just the data pertinent only to Medicare and Medicaid beneficiaries. They combined all the payer sources to determine the hospitals’ total revenue, and were able to calculate profits that way. Broadly, it found that hospitals posted lower profits in markets with a strong insurer, while facilities that are part of a dominant health system were able to generate higher margins. The more market share, the more negotiating power each party has.

“The most important factor I would say is the markup, the charge markup,” Bai says. “The higher (hospitals) charge, the more likely they are to make money. Medicaid just pays one charge, so hospitals have no negotiating power. But for privately insured patients, because of the high charge, they’re paying a high negotiating price. So start high, you end up higher.”

The news isn’t perhaps surprising. Medical City has spent years as one of the Dallas area’s most profitable hospitals. According to a 2014 analysis by Minnesota-based analyst Alan Baumgarten, Medical City had a profit margin of 31 percent in 2013 (Medical Center of Plano’s was 15.9 percent). Last year, Dallas Morning News reporter Jim Landers singled out the North Dallas hospital for its county-high charges for common procedures like baby deliveries and joint replacements. When it opened in 1974, it was an early adopter of amenities like natural light and original artwork, a strategy that’s become a cornerstone of current healthcare design. Just take a look inside UT Southwestern’s William P. Clements Jr. University Hospital or the new Parkland facility for proof. Medical City Dallas has attracted more than 1,500 physicians with admitting privileges, offering practitioners what it hopes is an attractive setting to treat patients.

As Baumgarten’s report noted, Medical City has the highest margin in North Texas. This Health Affairs study shows it’s the most profitable of all HCA facilities—and 25 wound up in the nation’s top 100. HCA North Texas declined an interview request, but sent the below statement:

“We continually focus on our clinical and operational performance, both of which are keys to a well-run hospital and providing the best possible care. We are proud of our record of caring for our community, which includes a robust charity care program and uninsured discounts to thousands of patients.”

According to the Texas Hospital Association’s txpricepoint.org website database, the hospital from 2014 to 2015 provided $26.6 million in charity care and shouldered $64.3 million in total uncompensated care, about 1.14 percent and 2.77 percent of its total charges, respectively. For comparison, nonprofit competitor Baylor University Medical Center provided $102.8 million in charity care and $172.8 million in uncompensated services, about 4.92 percent and 8.27 percent. (Nonprofits are mandated by law to provide at least 4 percent on charity care.)

Some have taken issue with the study. The chief financial officer for the Wisconsin-based Gunderson Health System disputed the findings, writing in a retort that the Medicare claims data does not take into consideration all of the costs for the system as a whole. Bai and Anderson said that’s because they weren’t looking at systems; they were looking at individual hospitals. In a blog post, the two argue that the claims data is respected enough to be used in myriad peer-reviewed studies, thus standing by their findings.

“To our knowledge, there is no database that contains financial statements for all hospital systems in the nation. In addition, patients go to specific hospitals to receive medical care,” Bai and Anderson wrote. “We believe, therefore, that the hospital is the appropriate unit to analyze.”

HCA North Texas has been on a furious expansion tear in recent years. In 2016, it has bought bankrupt Forest Park hospitals in Frisco and in Dallas (the latter deal is expected to close this summer) and sunk significant capital into expanding services at Medical Center of Plano. Medical City Dallas last month completed a 123-bed expansion in its Building E tower, which boosts its square footage by 156,000. It also included 32 new ICU rooms and 46 new orthopedic, neurology, and epilepsy patient rooms.

And rocky negotiations with Blue Cross Blue Shield of Texas nearly caused the system’s hospitals to fall out of network. The two shored up their differences before the contracts expired, however, preserving HCA’s hospitals as in-network for all BCBSTX plan holders.

Posted in Hospitals, News.
  • Carol S. Whalen

    This article disgusts me. I am in favor of for profit hospitals charging reasonable prices and making a reasonable profit.. But to brag that high mark up is the key is sickening in this time of soaring health costs.. To say that one starts high with private insured patients so one can negotiate up, I assume as high is possible, is despicable. No wonder people are no longer able to afford private health insurance.