While managed care has helped reduce the average length of stay in hospitals, it doesn't seem to have affected hospital profit margins -- at least until very recently. In fact, those margins rose between 1993 and 1997 as the average length of hospital stay dropped. Meanwhile, HMO profit margins dropped.
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SOURCE: KAISER FAMILY FOUNDATION ANALYSIS OF INTERSTUDY AND HCIA INC. DATA; AMERICAN HOSPITAL ASSOCIATION; HBS INTERNATIONAL INC.