Layoffs cool as hospital margins stabilize

Layoffs are slowing at hospitals and health systems as margins gradually improve, but CFOs continue to focus on controlling costs — particularly on the labor and supply fronts — to secure the long-term sustainability of their organizations.

Last year was characterized by hospital and health systems big and small trimming their workforces due to financial and operational challenges. 

From October 2022 through December 2023, Becker's reported on more than 100 hospitals and health systems across the country that laid off workers, eliminated positions or reduced or closed certain facilities and services to help shore up finances. 

While layoffs have been reported at some hospitals this year, workforce cuts have been occuring at a slower rate compared to last year. 

Hospital revenues are up year over year as patient volumes continue to rebound. Operating margins have fluctuated in the last 12 months, from a -1.2% low in February 2023 to 5.5% highs in June and December, according to Kaufman Hall. In January, average operating and operating EBITDA margins dropped to 5.1%.

Kaufman analysts noted that too many hospitals are losing money and high-performing hospitals doing better and better, "effectively pulling away from the pack." 

Fitch Ratings has described 2024 as another "make or break" year for a significant portion of the nonprofit hospital sector, which continues to battle an ongoing "labordemic." However, the U.S. has also avoided a recession so far, partly due to a robust healthcare job market, according to The Wall Street Journal.

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