1. Chartbook 2005 Trends in the Overall Health Care Market Chapter 4: Trends in Hospital Financing

2. Chartbook 2005 Trends in the Overall Health Care Market 4-2 Chart 4.1: Percentage of Hospitals with Negative Total Margins 1980 - 2003 Source: The Lewin Group Analysis of the American Hospital Association Annual Survey data, 1980 – 2003, for community hospitals

3. Chartbook 2005 Trends in the Overall Health Care Market 4-3 Total Margin Chart 4.2: Aggregate Total Hospital Margins (1), Operating Margins (2), and Patient Margins (3) 1990 - 2003 Source: The Lewin Group Analysis of the American Hospital Association Annual Survey data, 1990 - 2003, for community hospitals (1) Total Hospital Margin is calculated as the difference between total net revenue and total expenses divided by total net revenue (2) Operating Margin is calculated as the difference between operating revenue and total expenses divided by operating revenue (3) Patient Margin is calculated as the difference between net patient revenue and total expenses divided by net patient revenue Operating Margin Patient Margin

4. Chartbook 2005 Trends in the Overall Health Care Market 4-4 Source: DATABANK data. (1) Data represent the experience of 884 hospitals that consistently reported to DATABANK in 2003 and 2004. Data are unweighted and over represent smaller hospitals in western, rural states. A subset of states are not represented in DATABANK. DATABANK is an online database of hospital utilization and financial performance indicators. Chart 4.3: Hospital Margins Reported to DATABANK (1) 2003 vs. 2004 2003 2004

5. Chartbook 2005 Trends in the Overall Health Care Market 4-5 Chart 4.4: Distribution of Outpatient vs. Inpatient Revenues 1980 - 2003 Gross Inpatient Revenue Gross Outpatient Revenue Source: The Lewin Group analysis of American Hospital Association Annual Survey data, 1980 – 2003, for community hospitals

6. Chartbook 2005 Trends in the Overall Health Care Market 4-6 Chart 4.5: Annual Change in Hospital Operating Revenue and Expenses per Adjusted Admission (1) 1981 - 2003 Source: The Lewin Group Analysis of the American Hospital Association Annual Survey data, 1981 - 2003, for community hospitals (1) An aggregate measure of workload reflecting the number of inpatient admissions, plus an estimate of the volume of outpatient services, expressed in units equivalent to an inpatient admission in terms of level of effort Change in Operating Revenue Change in Total Expenses

7. Chartbook 2005 Trends in the Overall Health Care Market Uncompensated Care (2) – 5.5% Other Government – 6.1% Uncompensated Care (2) – 5.1% Private Payer – 41.8% Medicare – 34.6% Medicaid – 9.6% Non-patient (1) – 2.7% Non-patient (1) – 2.6% Private Payer – 37.5% Other Government – 1.6% Medicaid – 14.3% Medicare – 38.5% Chart 4.6: Distribution of Hospital Cost by Payer Type 1980, 2002, and 2003 Source: The Lewin Group Analysis of the American Hospital Association Annual Survey data, 1980, 2002, and 2003, for community hospitals (1) Non-patient represents costs for cafeterias, parking lots, gift shops and other non-patient care operating services and are not attributed to any one payer (2) Uncompensated care represents bad debt expense, at cost, and charity care 38.4% 13.9% 1.6% 38.2% 5.4% 2.6% 4-7

8. Chartbook 2005 Trends in the Overall Health Care Market 4-8 Chart 4.7: Aggregate Hospital Payment-to-Cost Ratios for Private Payers, Medicare, and Medicaid 1980 - 2003 Source: The Lewin Group analysis of American Hospital Association Annual Survey data, 1980 – 2003, for community hospitals (1) Includes Medicaid Disproportionate Share payments Private Payer Medicare Medicaid (1)

9. Chartbook 2005 Trends in the Overall Health Care Market 4-9 Chart 4.8: Hospital Payment Shortfall Relative to Costs Medicare, Medicaid, and Other Government 1997 - 2003 Source: The Lewin Group analysis of American Hospital Association Annual Survey data, 1997 – 2003, for community hospitals Other Government Medicaid Medicare Billions

10. Chartbook 2005 Trends in the Overall Health Care Market 4-10 Chart 4.9: Income from Investments and Other Non-operating Gains (1) as a Percentage of Total Net Revenue 1980 - 2003 Source: The Lewin Group analysis of the American Hospital Association Annual Survey data, 1980 - 2003, for community hospitals (1) Non-operating gains include income from non-operating activities, including investments, endowments and extraordinary gains, as well as the value of non-realized gains from investments

11. Chartbook 2005 Trends in the Overall Health Care Market 4-11 Chart 4.10: Number of Bond Rating Upgrades and Downgrades of Non-profit Hospitals 1993 - 2004 Source: Standard & Poors, 2005

12. Chartbook 2005 Trends in the Overall Health Care Market 4-12 Years Chart 4.11: Median Average Age of Plant 1990 - 2003 Source: CHIPS: The 1994 Almanac of Hospital and Financial Operating Indicators, The 1996-7 Almanac of Hospital and Operating Indicators, and 1998-2003 data from Ingenix: Almanac of Hospital Financial and Operating Indicators 2005

13. Chartbook 2005 Trends in the Overall Health Care Market 4-13 Chart 4.12: Percent Change in Employment Cost Index (1), All Private Service Industries, All Health Services, and Hospitals September 2004 (2) Source: Bureau of Labor Statistics, Employment Cost Index, 12 Months Ending September, 2004; www.bls.gov (1) Total compensation (2) Data is for 12 months ending September 2004; December 2004 data has not been published as of yet