Hospitals' rocky road to recovery

Many healthcare leaders have said that 2022 was among the most financially challenging years hospitals and health systems have had to face, and that recovery remains challenging, according to a Sept. 27 report from the American Hospital Association.

Recent reports from Fitch Ratings and Moody's Investor Services demonstrate how almost every metric of hospital and health system financial health — including operating margins, days cash on hand, average debt to cash flow and median cash to debt —  declined last year. 

Because of these trends, most ratings agencies are reporting significantly more credit rating downgrades than upgrades. Becker's has reported on more than 30 hospitals and health systems that received credit rating downgrades so far this year. 

Though median hospital margins have improved slightly in recent months, Kaufman Hall's August National Hospital Flash Report indicates that financial recovery may have slowed or even reversed. 

All volume indicators registered declines in July, the most recent month for which Kaufman Hall data is available, with outpatient volumes decreasing slightly more than inpatient. Labor continues to be the biggest share of hospital and health system expenses, with expenses expected to continue to fluctuate due to inflation, according to the report. In addition, bad debt and charity care also rose month over month.

"These studies all tell a different story than the false narrative from hospital critics who concentrate myopically on single point-in-time operating margins," AHA Director of Policy and Research Analysis Benjamin Finderwrote. "These critics often cherry-pick a select few health systems to make sweeping generalizations about the financial conditions of all hospitals and health systems. As we look back on the last three years, it is clear that 2021 was the eye of the hurricane — a brief period of stability bookended by extreme volatility."

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