Alabama hospitals are profitable enough to comply with price transparency requirements

Like its counterparts throughout the country, the Alabama Hospital Association is pushing claims that their hospitals are hemorrhaging money. Recent media stories claim Yellowhammer State hospitals have lost $1.5 billion since 2020 and are facing an "existential crisis." According to a hospital-industry-funded consultancy, the bulk of these losses came in 2022.

But a deeper dive into the finances of Alabama hospitals tells a different and more complex financial story. Annual financial reports of three large hospitals in the state suggest Alabama hospital systems made significant operating profits between 2020 and 2022. Reported losses are primarily the result of unrealized investment losses associated with the 2022 stock market downturn. Despite the financial market pullback, they continue to sit on hundreds of millions of dollars of surplus funds.

With such significant financial resources available, Alabama hospitals have no financial excuse for failing to comply with a federal hospital price transparency rule that took effect over two years ago on January 1, 2021.

UAB Hospital, the biggest hospital system in Birmingham and the state, made $237 million in operating profits 2020, $336 million in 2021, and $225 million in 2022.

Baptist Health, the largest hospital in Montgomery, and Huntsville Hospital Health System, the largest hospital system in Huntsville, each made tens of millions of dollars in operating profits in 2020 and 2021. According to their most recent 2022 disclosures, they were also profitable in 2022.

So where are these claims of dramatic losses coming from? American not-for-profit hospitals are sitting on nearly $300 billion of investments, including private-equity and venture-capital funds. As anyone who paid attention to their 401(k) or 529 accounts knows, 2022 was a brutal year for financial markets. The S&P 500 fell by 20%, marking its worst year since 2008.

Hospitals, when they operate like investment firms,  are not immune to such downturns. However, these investment "losses" exist only on paper.

Even with last year's market pullback, large Alabama hospitals continue to sit on hundreds of millions of dollars in assets. The most recent 2022 filings show UAB has $1.5 billion in cash and investments, Huntsville Hospital has $988 million, and Baptist Health has $375 million.

Hospitals have more than enough surplus funds to comply with the law on hospital price transparency and post online their actual prices by health insurance plan so consumers can avoid overcharging. The federal government estimates it costs hospitals less than $12,000 to turn over their prices.

Robust hospital price transparency can create a competitive, pro-customer healthcare marketplace that significantly reduces healthcare costs burdening patients, businesses, and the broader economy. Employers, who provide most Americans with private health coverage, can leverage this information and share the savings with their employees.

Consider the recent story of Lehigh County, PA, which provides healthcare coverage for about 2,400 employees, retirees, and their family members. The county government cut its healthcare costs by 43% by analyzing hospital price disclosures and steering members to quality, less expensive care. The county expects to save $13 million on its $30 million annual healthcare plan, offering a template for employers, unions, and state and local governments looking to reverse runaway costs.

Unfortunately, a new report by PatientRightsAdvocate.org finds that only a quarter of hospitals nationwide — and only 10% in Alabama — are fully following the price transparency rule. In other words, hospitals continue to profiteer off the backs of patients by keeping them in the dark about the costs of their care while flouting the very law meant to empower those patients.

The Biden administration has an opportunity to empower Alabamians and all Americans to inform themselves about the price of their care and avoid financial ruin. Holding hospitals accountable for well-documented outrageous prices will only be achieved by strongly enforcing the price transparency rule that hospitals are skirting.

Looking past the headlines, Alabama hospitals and their counterparts across the nation certainly have the financial resources to comply.

Marilyn Bartlett, CPA, CMA, CFM, CGMA, is the former administrator of the State of Montana Employee Health Plan. Christin Deacon is the former Director of Health Benefits Operations and Policy and Planning for New Jersey.

This article originally appeared on Montgomery Advertiser: Alabama hospitals profitable enough to comply with price transparency