Hospitals and health systems are losing money on virtual care across every major payer category even as adoption climbs, according Strata’s latest Performance Trends report.
The national analysis found telehealth encounters rose 79% between January 2019 and January 2026, marking the shift from a pandemic stopgap to a permanent fixture of care delivery. Despite that growth, average total cost margins for telehealth stayed negative in 2025 across commercial, Medicare, Medicaid and self-pay patients. Remote patient monitoring has soared 4,000% over the same time period.
“Healthcare organizations are increasingly turning to technology and new care delivery models to address workforce shortages and improve patient access,” said Steve Wasson, Strata’s chief data and intelligence officer. “The challenge is that many of these investments, particularly in virtual care, are occurring at a time when margins remain extremely narrow.”
Health system operating margins slipped to 0.2% in April from 0.4% in March, recovering from a 12-month low of negative 0.6% in January but still fragile. The April figure extends a halting recovery Becker’s reported in May, when Strata data showed margins reaching 0.4% in March after two months in the red and Mr. Wasson called the rebound fragile amid rising expenses and uncompensated care.
Non-labor costs kept climbing: drug expense rose 8.9% year over year in April, total non-labor expense grew 9.3%, and Northeast hospital utility costs jumped more than 30% in March against 2024 levels. Hospitals are also facing a growing amount of uncompensated care as bad debt and charity care increased 17% year over year.
The report also found the share of organizations with C-suite or vice president-level leaders focused on AI, data or machine learning has nearly tripled since 2019.
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