Nonprofit hospital financial performance improved in the 2024 fiscal year, with median operating cash flow margins hitting 6.3%, up one percentage point from the previous year, according to Moody’s report released Aug. 14.
“Improved revenue was supported by stronger volumes, both inpatient and outpatient,” the report noted. “While stable compared with fiscal 2023, expense growth remained high and was driven by permanent wage increases and supply inflation.”
10 things to know:
- Revenue was up 9.3% year over year, and grew faster than expenses due to a one-time 340B settlements and higher state-directed payments, according to the report. Higher patient volumes also drove revenue growth. The 50 largest hospitals reported average revenue growth of 10.3% while the smallest 50 hospitals reported revenue increased 7.1% on average.
- Inpatient admission grew 4.8% year over year, a five year high, while outpatient surgery volume increased 2.7%, a five-year low. Emergency room visits were up 4%.
- The average expense rate increased 7.3% in the 2024 fiscal year amid inflation. The 50 smallest hospitals reported expense growth at 5.3% while at the 50 largest hospitals expenses increased 9.5%. Around 20% of the largest hospitals reported an operating deficit, compared with 48% of the smallest hospitals, according to Moody’s.
- Liquidity improved after 12 months of strong investment returns. Hospitals reported an average of 194 days cash on hand, up from 189 the previous year.
- Hospitals with Aa credit ratings had an average of 282 days cash on hand while health systems with Baa ratings had an average of 123 days cash on hand. The situation was graver for hospitals with Baa ratings and below, which reported an average of 78 days cash on hand.
- Average total debt hit $671 million for the 2024 fiscal year, up over $564 million for the 2020 fiscal year. Moody’s reported total debt to cash flow dropped from 3.7x to 3.3x while investment debt improved from 182% to 196%. Debt to operating revenue hit a five-year low, dropping to 27.7%.
- The average operating margin grew from 0.5% in 2023 to 1.5% last year, and the average operating cash flow increased 6.3%. A3 and above rated hospitals had higher average operating cash flow margins, while hospitals with Baa1 ratings and below experienced continued operating challenges, with operating cash flow below 5%.
- Moody’s reported unrestricted cash flow and investments increased on average by 10%.
- Average capital spending at hospitals was “steady” with a 1.2x depreciation, according to Moody’s. Hospitals with a Baa and below credit ratings spent less, indicating a weaker performance and challenges “meeting routine capital needs.”
- The median Medicare patient volume as a percentage of gross revenue hit 48.3%, a five-year high, while Medicare managed-care plans increased to 22.4%.
“Systems have cited increasing denials from these plans as a key revenue challenge,” the report said. “Meanwhile, median Medicaid as a percentage of gross revenues hit a five-year low.”
