Hospitals are in many ways like hotels and the hotel industry has studied the effect of occupancy on profitability pretty thoroughly. It turns out that for medium price range hotels, 75% occupancy is the most profitable rate whereas for high-end hotels, 85% occupancy is peak profitability. Many hospital executives talk about 85% being the ideal occupancy rate for a hospital and I have to admit, that is sort of the number I have in mind when I look at our morning census. But is 85% really ideal? I would argue… no.
If the occupancy is too low, then you have too many staff sitting around without work to do and you will lose money. If the occupancy is too high, then a couple of nurse call-offs means excessive work for the other nurses and can hurt morale. Furthermore, if you are completely full, you have to turn away patients and in the long-run that can harm both reputation and future referrals. So, on the surface, the 85% number seems like a good compromise with enough capacity to manage an unexpected surge in admissions but no so low that you are sending nurses home.
The average occupancy across the USA in 2017 (a non pandemic year) was 65.9%. It would stand to reason that therefore some hospitals were at the 80-90% rate sometime in the year. Of course, the media doesn’t want this known, since panic is their lifeline.
When I drive by a hospital, I see it the same as when I drive by a “drive up” cigarette store or topless bar. I have little to no need for one. Frankly, I don’t need a mortuary either. My wife and I will be buried on our property. If she dies before me, only family, friends and Social Security will even know about it.
“Hospitals are in many ways like hotels and the hotel industry ...”
Informative post. Thanks.
Do hospitals get paid extra for coronavirus patients?
What percent of beds are intensive care?