North Texas is home to three of the top five health systems with the highest profit margins in the nation, according to a list compiled by Becker’s Hospital Review. Farmers Branch-based for-profit Tenet Healthcare tops the list, with Medical City Healthcare’s parent company, HCA Healthcare, placing second. Baylor Scott & White Health is the highest-ranked nonprofit system on the list, at No. 4.
After a difficult period following the pandemic with increased labor and supply costs, many large systems recovered in 2023. Larger systems were better able to weather the storm and come out on the other side in a better financial position than when the pandemic began, but smaller systems and individual hospitals haven’t been so lucky. In DFW, Medical City purchased the Wise County Health System and Trinity Regional Hospital Sachse after that hospital declared bankruptcy just a couple of years after opening. The assets of Hurst hospital St. Camillus were sold earlier this year after that facility went bankrupt, and East Dallas facility White Rock Medical Center filed for bankruptcy in 2022. Dallas-based Steward Health Care System is facing a number of financial struggles, with legislators worried that the system may fold.
The local struggles reflect a more prominent theme expressed in a 2021 Kaufmann Hall report that predicted that 53 percent of hospitals would have a negative operating margin in 2023. While larger systems thrived in the last year as a whole, smaller systems, rural hospitals, and those that serve patients with a less profitable payer mix have struggled.
DFW’s growth and relatively high cost of healthcare have buoyed local systems that are large enough to weather a few bumps in the road. Many local systems outperformed the average profit margin for U.S. businesses, which was 7.71 percent, according to an NYU study. The study found hospitals to have a net margin of 5.12 percent, though the systems mentioned below have other revenue generators like outpatient facilities, urgent cares, physician groups, and surgery centers, which are often more lucrative than hospitals that have to operate on tighter budgets with significant Medicare funding.
Becker’s reported that 58-hospital Tenet had an operating margin of 12.2 percent and an operating income of $2.5 billion in 2023, with revenue of $20.55 billion. In 2022, Tenet earned $19.2 billion in revenue. Tenet also operates hundreds of surgery centers and other businesses to support its revenue and recently sold two California hospitals.
Medical City, which operates 20 hospitals in North Texas, is owned by parent company HCA Healthcare. HCA operates 184 hospitals with a profit margin of 11.8 percent in 2023, with an operating income of $7.7 billion on revenue of $65 billion. In 2022, the system earned $60.2 billion in revenue.
Dallas-based Baylor Scott & White Health is the most extensive nonprofit system in the state and reaches from North Texas to Austin and into East Texas near College Station. It operates 52 hospitals and 800 patient care centers and ended 2022 with a profit margin of 8.3 percent off an operating income of $634 million and total 2023 revenue of $7.6 billion. These totals were for the six months that ended the year. For comparison, Palo Alto, California-Stanford Health Care earned $7.9 billion in 2023, but its operating income was only $414.9 million. Baylor University Medical Center trustee told D CEO Healthcare that the flagship hospital is eyeing a significant renovation and modernization.
These systems outperformed systems like Mayo Clinic, Stanford Health Care, Cleveland Clinic, Kaiser Permanente, and Mass General Brigham, some of the most prestigious institutions in the country.
CHRISTUS Health, which recently celebrated the opening of its new 15-story, 400,000-square-foot headquarters in Irving, is also on the list, though its operating margin is lower than the others listed, at 4.2 percent. The 600-location system earned an operating income of $324.5 million on revenue of $7.8 billion.
Becker’s list, which features a number of high-earning nonprofit systems, is more evidence of the similarity between the costs and operations of nonprofit and for-profit systems. A 2018 Health Affairs report found that nonprofit hospitals provided nearly 40 percent less charity care than for-profit hospitals. For every $100 of care delivered, nonprofit hospitals contributed $2.30 of charity care, while for-profit hospitals provided $3.80 for every $100 of care. Government hospitals provided $4.10 for every $100.
“Many government and nonprofit hospitals’ charity care provision was not aligned with their charity care obligations arising from their favorable tax treatment,” the report read. “Policymakers may consider initiatives to enhance hospitals’ charity care provision, particularly hospitals with government and nonprofit ownership.”
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