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Description of Business

Establishments that specialize in the care and treatment of patients affected with acute or chronic mental illness.

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.

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.

Psychiatric hospitals fall into one of two categories: nonprofit or for-profit. Nonprofit entities include government-administered facilities and charitable institutions. In the mid-1990s, nearly one-half of the nation’s psychiatric hospitals were either nonprofit or government entities. In keeping with this configuration, the standards and revenues of the industry are largely shaped by government legislation.

Red Flags and Risks

In recent years U.S. hospitals have been increasingly under pressure by government and businesses to provide higher quality service at lower costs. 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.

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