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Acute General Hospitals

We have years of experience in this industry for the valuation of the business, equipment and real estate. Let us help you with our valuation consultation in all areas of the valuation of acute general hospital businesses. Below is a brief synopsis of the industry.

Description of Business

Establishments that specialize in short-term medical treatment, for patients having an acute illness or injury or recovering from surgery.

General Industry Information

According to the 2002 Statistical Abstract of the United States, the United States had 5,810 general and surgical hospitals in 2000, down from 6,965 in 1980. Of the total facilities in 2000, approximately 3,000 hospitals had more than 100 beds. Made up of both non-profit and profit-making establishments, they employed slightly more than 5 million workers and took in about $412 billion in annual gross revenues. This amount accounted for nearly one-half of the nation’s total annual health care employment and health care expenditures, placing hospitals at the center of the health care industry. Although hospital revenues have increased substantially every year, from $102 billion in 1980 to $412 billion in 2000, or 404 percent, costs incurred by hospitals have also increased, from nearly $92 billion in 1980 to more than $395 billion in 2000, or 429 percent.

In recent years U.S. hospitals have been increasingly under pressure by government and businesses to provide higher quality service at lower costs while increasing access and preserving patient choice. A move to emphasize outpatient over inpatient care and efforts to use health maintenance organizations (HMOs) and other cost-cutting measures implemented by employers dramatically altered the business in the 1980s and 1990s. One result was a trend toward more academic medical centers, more ambulatory surgery, and fewer community hospitals, which declined in total number by 17 percent after 1981. As pressure to enact such changes continued, general medical and surgical hospitals approached the end of the twentieth century with persistent uncertainty about the direction and shape of their industry’s future.

Hospitals receive their revenues from different sources for the services they provide to patients. In the early 2000s the largest source of income to community hospitals came from Medicare and Medicaid programs. Of the $1.4 trillion spent on health care in 2001, governmental funds provided 46 percent, or $648 billion. Private insurance paid 35 percent, or nearly $487 billion, and out-of-pocket expenses accounted for 15 percent, or $210 billion. The remaining 4 percent came from other sources of revenue.

Red Flags and Risks

Hospital expenses are strongly affected by legislation, costs of medical technology, and trends in medical practice. As these expenses rose throughout the 1990s and into the 2000s, on-site administrative, food service, maintenance, and laundry support often were streamlined or contracted out in response. To counteract rising costs, many hospitals also attempted to expand their revenues by increasing their role in community health maintenance efforts beyond traditional emergency, obstetrics, and inpatient care to include disease prevention and patient education programs such as weight reduction, drug rehabilitation, prenatal care, and pediatric wellness.

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