Health system margins 'encouraging' while hospitals report dip: 10 notes

Health system margins trended up in October after three months of declines, according to data from Strata Decision Technology. However, hospitals saw operating margins further narrow month over month.

"It's encouraging to see that health systems had even minimal gains to start the fourth quarter, given the performance declines they experienced throughout Q3," said Steve Wasson, chief data and intelligence officer at Strata Decision Technology. "At the same time, the decrease in operating margins for individual hospitals reflects the need for organizations to remain vigilant as they contend with unrelenting increases across both labor and non-labor expenses."

The data was gathered from surveys completed by leaders from 1,600 hospitals and more than 135,000 physicians on their performance in October 2024.

Ten takeaways:

1. Average health system margins increased from 1.6% in September to 1.8% in October. Year to date hospital operating margins dipped to 4.9% from 5.1%.

2. Large hospitals with 300 to 499 beds had 2.9 percentage point margin increases while hospitals with 200 to 299 beds had the smallest margin increase at just 0.9 percentage points.

3. The average EBITDA margin for hospitals was up 1.6 percentage points year over year, and 1.2 percentage points month over month.

4. Hospital expenses climbed 4.4% month over month and 8.5% year over year on average.

5. Hospitals reported an average 10% increase in non-labor expenses year over year. Drug expenses jumped 15.2% and supply costs were up 13.2%.

6. Labor expenses increased 4.4% month over month and 6.5% year over year.

7. Outpatient visits increased 12.8% month over month and 8.6% year over year in October. Outpatient revenue jumped 12.7% year over year.

8. Inpatient admissions were up 3.7% month over month and 4.7% year over year. Inpatient revenue increased 5.9% year over year.

9. Emergency visits dropped 3.1% month over month and 1.4% year over year.

10. Gross hospital revenue increased for the 18th consecutive month, jumping 8.1% month over month. Overall revenue increased 11.2% year over year in October.

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