Hospitals continue to battle margins amid rising costs, flat revenues: 5 findings

More than half of hospitals and health systems are seeing margins hover above zero as expenses increase and revenue remains flat, according to an October report from Strata Decision Technology, a healthcare analytics company.

Five findings:

1. Total operating margins among the more than 1,100 hospitals analyzed are down compared to 2019 pre-pandemic margins, according to the report. Year to date, the median operating margin is 4.6 percent, a significant drop from 7 percent in the baseline year of 2019 and 7.9 percent in 2021.

2. Year to date, operating margin on patient revenue has decreased 58 percent compared to 2019 pre-pandemic operating margins and down 68 percent compared to 2021, according to the report. Median patient margins per adjusted discharge for 2022 are $358.

3. Researchers indicated that the decrease in operating margins can be partially attributed to government support receding, highlighting the importance of Coronavirus Aid, Relief, and Economic Security Act funding and how many healthcare facilities relied on this support.

4. The bottom quartile of hospitals have operating margins of -5.4 percent year to date, -1.6 percent in 2021, -3.6 percent in 2020 and 0.3 percent in 2019, researchers found. Larger institutions (those reporting $1 billion or more in annual revenue) are performing better with  lowest quartile operating margins at -0.7 percent year to date, 1 percent in 2021, 4.4 percent in 2020 and 6.9 percent in 2019, according to the report.

5. Expenses per adjusted discharge are up 25.9 percent year to date compared to 2019, while revenue per adjusted discharge is up 19.3 percent for the same period. Compared to 2021, 2022 expenses per adjusted discharge are up 9.6 percent year to date, while revenue per adjusted discharge is up 2.6 percent. 

Click here to access the full report.

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