The trend and its impact will be worth watching in the coming months, Kaufman Hall analysts say.
Hospital financial performance in the past year has been a mixed bag.
Though a jump in revenue and manageable expense growth have helped hospital margins stabilize, a rise in bad debt and volume of charity care have kept bottom lines in check, according to Kaufman Hall's latest National Hospital Flash Report.
The analysis, which reflects data from more than 1,300 hospitals nationwide through December, revealed that hospitals finished 2024 with a 4.9% median operating margin after a strong close to the year that included a 7.6% figure for the final month. Compared to 2023, the 4.9% median operating margin represented a 9% year-over-year increase.
Hospitals, however, experienced swelling bad debt and charity care, likely stemming from the continued Medicaid redetermination process and health insurers bumping up denials, Kaufman Hall analysts stated.
Bad debt and charity per calendar day rose 14% year to date in 2024 versus 2023, and 20% compared with 2021. As a percent of gross revenue, those areas increased 7% year-over-year for the full calendar year.
"While it’s encouraging to see continued stability in hospitals' financial well-being over the past 12 months, historically slim margins indicate hospitals are not yet in a fully sustainable position," Erik Swanson, senior vice president and data and analytics group leader with Kaufman Hall, said in a statement. "The uptick in bad debt and levels of uncompensated care provided by hospitals will be an indicator to monitor over the next several months. On the workforce front, we continue to see a competitive and tight labor market across the healthcare sector."
Reasons for optimism for hospitals going forward include gross operating revenue per calendar day being up 8% in 2024 versus 2023, with inpatient revenue jumping 8% and outpatient revenue increasing 9%.
Meanwhile, adjusted discharges per calendar day for the year were 5% higher than in 2023, and observation patient days as a percentage of patient days declined by 13% over that period.
Expenses also continue to rise, the report highlighted, but they aren't outpacing inflation on a volume-adjusted basis. Increases for the full year on a calendar day basis were 6% for total expenses, 5% for labor expenses, 7% for non-labor expenses, 9% for supply expenses, 9% for drug expenses, and 8% for purchased service expenses.
Penn State Health's Deborah Addo shares how leaders operating within a short timeframe at the top can make an impact.
Even if an interim CEO's time in the position is short and sweet, they can make the most of the opportunity to advance both the goals of their organization and their career.
Deborah Addo, interim CEO, president, and chief operating officer of Penn State Health, told HealthLeaders about her approach to the role and how others in her position can learn from her experience.
The subsidiary and its growing fleet of health systems had a noticeable impact on Kaiser's year-end financial report.
Less than a year since launching, Risant Health is proving to pay dividends for Kaiser Permanente.
The integrated health system reported its 2024 earnings, which showed the subsidiary and its additions are boosting the bottom line.
In its first earnings report to include consolidated financial results for the health system, health plan, and Risant, Kaiser brought in $115.8 billion in operating revenue across 2024, compared to $100.8 billion in the prior year.
Kaiser's net income for the period was $12.9 billion, with Risant's acquisitions accounting for $6.8 billion of that figure, resulting in a jump from the $4.1 billion reported in 2023.
Operating expenses also increased year-over-year to $115.2 billion, compared to $100.5 billion in the previous period, as Kaiser dealt with "significant financial pressures" such as patient volume and high prescription drug prices, the system stated.
"Our financial performance in 2024 showed a modest improvement in operating income and, like others, we saw gains in nonoperating income driven by investment returns in the financial markets," Kaiser Permanente executive vice president and CFO Kathy Lancaster said in a statement. "This financial performance, along with carefully managing our resources and becoming more effective in our operations, allowed us to maintain investments in our capital and technology programs to drive affordability and enhance the consumer experience."
Risant launched last April after closing its deal for Geisinger Health, giving it its first health system for its value-based network.
Risant then tabbed Cone Health in the summer as its second acquisition before finalizing that transaction in December.
Both Geisinger and Cone were profitable systems before being scooped up by Risant, with the former reporting $367 million in net income in 2023, while the latter recorded $197.6 million.
At least three to four additional systems are expected to be added within the next half-decade, based on the plans Risant has laid out, which includes reaching a total revenue of $30 to $35 billion.
Currently, Kaiser and Risant consist of 55 hospitals, 40 retail and employee clinics, 841 medical offices, and more than 13 million health plan members.
In the finite time Deborah Addo has at the helm of the health system, she's striving to leave her mark while paving the way for a successor.
The lifespan of an interim hospital CEO's tenure can be unpredictable. "It's time-certain, but uncertain," Penn State Health interim CEO Deborah Addo told HealthLeaders.
Shepherding a health system through a transition period between permanent guiding hands brings with it its own set of unique challenges. How much action do you take? Should you operate as a wartime or peacetime general? How long should you plan for the changes you implement to be in place?
It, of course, depends on the context. In the case of Addo, she served as president and chief operating officer of the Hershey, Pennsylvania-based system since 2021 before filling the void left by Steve Massini, who retired as CEO in October.
As Addo took the reins, she first sought out clarity in how she should approach her time in the position and what direction she could take it.
"I had some critical conversations with the president of our university to really ask, 'Hey, are you looking for someone for maintenance or are you looking for someone for movement?' I think you do need to clarify that and both are okay, dependent on where your organization is, but it also needs to align with the person that you're asking to do it," Addo said. "I'm less okay with maintenance, so it would have been hard if that was her answer. Fortunately, it wasn't, and it was for movement, so it really then set the course for what we needed to do."
Pictured: Deborah Addo, interim CEO, president, and chief operating officer, Penn State Health.
That confidence to play a pivotal role, both within herself and from her bosses, was developed over the three-plus years Addo spent working closely with Massini as second in command. She learned firsthand what it takes to grow the system, its legacy, and its pride.
Now, Addo is applying that experience within the confines of the interim CEO position, for as long as she has the opportunity.
"One of the things is ensuring that you still create what will be those measures for success, even if it's a short period of time," Addo said. "You still create what is the strategic plan, even if it's for a short period of time. But you also have to be comfortable with letting go of ownership because there is a reality that some of what you put in place might be changed sooner versus later. So I think if you go into it with that mindset, then it makes it a whole lot easier."
With as much turnover as C-suites in hospitals and health systems across the country are experiencing, it's vital for organizations to have a succession plan in place. "I actually think it's irresponsible if we don't," Addo said.
Addo has undertaken not just one, but two key duties in Penn State Health's succession planning. In addition to serving as interim CEO, she's also very much engaged in the search process for a successor, which she expects to be completed in late spring.
"I'm working with the search company that is going to be leading this up to make sure that the voice of the executive team is also very much heard and understood," Addo said. "I'm realizing that we are going to be the support system for whoever comes in and assumes the helm. And then as we continue, it's looking at how do we not miss a beat? I want that person to be even better positioned because of the time that I've spent in this chair."
Addo, who used to run track, likens the process of creating the right environment for a successor to handing off the baton in the 4x400-meter relay. When you mess up the handoff, she noted, you're unlikely to get the outcome you want.
"For me, it's making sure that I give a smooth handoff and then get out of the way."
The health system is set to make cuts at management and administrative levels due to financial pressures, the organization said.
Mass General Brigham (MGB) announced it will conduct the largest layoffs in the health system's history in response to financial headwinds and operational challenges.
The nonprofit organization's decision to eliminate hundreds of non-clinical workers in management and administrative positions is largely being driven by a projected $250 million budget gap over the next two years.
MGB is Massachusetts' largest private employer with around 82,000 employees. The restructuring process is expected to be completed in March.
"These actions are primarily focused on non-clinical and non-patient facing roles in an effort to enhance efficiency, reduce costs, and maximize support for frontline clinicians," an MGB spokesperson said in a statement. "This decision is necessary despite years of diligently promoting a culture of responsible resource stewardship and developing initiatives that generate diversified sources of revenue."
Though MGB reported a healthy bottom line in the most recent fiscal year, a closer look at its earnings revealed financial concerns. The system reported a $45.7 million operating gain and $2 billion in net income for the year ended Sept. 30, but much of that profitability came from investment gains.
When reporting its fiscal year results, MGB also called attention to the "unrelenting capacity crisis" affecting Massachusetts hospitals, leading to stunted revenue growth.
These challenges are coming at a time when MGB is working to integrate the clinical and academic departments of its two flagship facilities, Massachusetts General Hospital and Brigham and Women's Hospital. The system announced the plan last March and said it would take several years to consolidate the hospitals, which have operated independently.
Creating efficiency in its administrative structure has been a focus for MGB leadership for some time, according to The Boston Globe, which first reported the job cuts. Studies of the organization have found that MGB "had more managers per front-line worker than industry benchmarks, duplicative management roles, and many layers of managers," the report noted.
Meanwhile, hospitals everywhere are dealing with slashed support for research funding. MGB's announcement of layoffs came on the heels of news that the National Institutes of Health would reduce reimbursement to hospitals for indirect costs of clinical research to 15%.
MGB executives told The Boston Globe that the layoffs are not in response to federal money drying up, but allow the health system to deal with similar unforeseen obstacles.
"Like healthcare systems everywhere, we face unrelenting pressure that threatens our ability to continue to provide the care, innovation and service that define us," MGB CEO Anne Klibanski wrote in a message to employees. "If we do not take definitive action now to stabilize our financial health, we compromise our ability to continue to invest in our mission."
It's the latest development in the long saga of troubled Crozer, which has yet to secure a permanent owner.
Prospect Medical Holdings' most recent attempt to divest Crozer Health wasn't completed, putting the long-term fate of the four-hospital health system up in the air.
For now, Crozer's facilities will remain open after a U.S. bankruptcy judge approved a plan to place the turbulent asset into a 30-day receivership with FTI Consulting while Prospect searches for new owners.
The deal between Prospect, which filed for chapter 11 bankruptcy in January, and the Commonwealth of Pennsylvania was signed off on by Judge Stacey Jernigan and came after a proposed sale of Crozer to a nonprofit consortium of healthcare operators was put on hold.
Under the agreement, advisory firm FTI Consulting will receive $20 million in funding from Pennsylvania to keep Crozer's operations running for one month.
Two of Crozer's hospitals remain operational and continue to provide care in Delaware County—Crozer-Chester Medical Center and Taylor Hospital. Crozer previously shut down Springfield Hospital and Delaware County Memorial Hospital.
"Crozer Health looks forward to working constructively with the Commonwealth of Pennsylvania and FTI Consulting to ensure that our communities continue to receive uninterrupted access to the critical health services they require," Crozer Health CEO Anthony Esposito said in a statement. "As always, we remain focused on providing high-quality and personalized care to our patients, and will continue to uphold that commitment throughout this process."
Pennsylvania authorities filed a lawsuit last year against Prospect and its former private equity owner, Leonard Green & Partners, alleging mismanagement that led to the closure of half of Crozer's hospitals.
A recent bipartisan report from the Senate Budget Committee found that Leonard Green collected $424 million of the $645 million in dividends and preferred stock redemption that Prospect paid out to investors. It also revealed that Prospect engaged in a $1.55 billion sale-leaseback deal with Medical Properties Trust, leaving it with crippling debt.
"Prospect has a long track record of reckless, greedy, and irresponsible management of Crozer — and they will not receive a cent of this funding," Gov. Josh Shapiro spokesperson Will Simons said in a statement.
"How do we create that energy without the drama," says Inspira Health president and CEO Amy Mansue.
In this episode of HL Shorts, Inspira Health president and CEO Amy Mansue shares her perspective on how her role and the industry at large has changed since she took the reins of the South Jersey-based health system in 2020.
Reports forecast costs swelling, forcing hospitals to be proactive with their supply chain strategy.
Tariffs imposed by the Trump administration are expected to place additional financial pressure on hospitals and health systems, affecting supply chain expenses and procurement.
Providers that haven't planned for possible tariffs will have to act swiftly to mitigate rising costs, which have the potential to further restrict hospital margins.
On February 1, President Donald Trump signed executive orders implementing tariffs on imports coming from Canada, Mexico, and China. While the U.S. reached deals with both Canada and Mexico to delay the tariffs that were set at 25% for 30 days, a 10% tariff is currently in place on all imports from China.
In response, American Hospital Association president Rick Pollack penned a letter to the president asking that medical products and drugs be exempt from the tariffs.
"Despite ongoing efforts to build the domestic supply chain, the U.S. health care system relies significantly on international sources for many drugs and devices needed to both care for patients and protect our health care workers," Pollack wrote. "Tariffs, as well as any reaction of the countries on whom such tariffs are imposed, could reduce the availability of these life-saving medications and supplies in the U.S."
Multiple reports and surveys conducted ahead of the tariff implementations anticipated supply chain cost increases.
Vizient's analysis revealed that supply chain prices are expected to rise by 2.3% between July 1, 2025, to June 30, 2026. One import from China that will be significantly affected by the tariffs, the report noted, is enteral syringes. However, the effective date on tariffs on enteral syringes was pushed back to 2026, allowing providers additional time to diversify their manufacturers outside of China.
"These dynamics are part of the reason strategic forecasting should be a routine part of provider operations and not just an annual exercise-based budgeting cycle," Jeff King, research and intelligence director at Vizient, said in a statement.
A survey by Black Book Research, meanwhile, highlighted concerns among healthcare professionals, including hospital finance and supply chain executives, payers, patients, health market customers, pharmaceutical and medical equipment manufacturers, and physicians and ancillary practice administrators.
Of the 200 respondents, 164 predicted that costs for hospitals and health systems will jump by at least 15% in the next six months as a result of tariffs. Nearly seven out of 10 (69%) respondents estimated that pharmaceutical costs will increase by at least 10% due to the China tariff on active pharmaceutical ingredients. To offset higher costs, 27% of respondents reported that they are seeking domestic or alternative international suppliers.
The situation with tariffs imposed by the Trump administration remains fluid, but it's not as if it has caught the industry by surprise. In Premier's 2024 Supply Chain Resiliency survey, 80% of providers and 84% of suppliers anticipated supply chain challenges to worsen or remain the same this year, while 85% of suppliers expected regulatory policy changes to affect supply chain strategies.
In its recent earnings call, HCA Healthcare told investors it "has been working on tariff mitigation strategies for many years," including fixed price contracting, supply chain mapping, and risk assessment, CFO Mike Marks said.
In addition to locking in prices for 70% of supply spend for 2025, HCA has also been diversifying away from Chinese suppliers, according to Marks.
Two hospital leaders share what goes into determining if a merger or partnership is worth pursuing.
Hospital and health system CEOs can't reap the benefits of a well-executed merger or acquisition without first identifying the right opportunities for their organizations.
What goes into that assessment and decision-making process can vary, but understanding if you should pursue M&A and then pinpointing suitable partners are necessary steps for a successful integration strategy.
Here are three areas they highlighted for assessing if your organization is ready for dealmaking:
Build on care continuum
"The first thing we want is to make sure that it fits into our mission and our core," Banos said.
For San Antonio-based University Health, that mission revolves around managing the patient or the population through a complete continuum. When an opportunity comes up, Banos and the leadership team discuss how it would fit in one the three pillars of pre-acute, acute, and post-acute strategy.
An example of that is University Health looking at housing locations where they can keep patients in need of liver, lungs, or kidney transplants for a period while they're being assessed or post-transplant.
"We want to make sure that it helps us provide either a continuation of care or something that's a value-added service," Banos said.
Don't just bring in value, provide it
While CEOs ultimately pursue M&A to enrich their own organizations, knowing what you can bring to the table in a partnership is vital to landing a deal, according to Heywood.
Aspirus Health went through its own merger less than a year ago when the Wausau, Wisconsin-based health system combined with Duluth, Minnesota-based St. Luke's to form a 19-hospital entity.
"Before we partnered with St. Luke's, the question I asked the team was, 'What does Aspirus mean to you? What do you think makes Aspirus unique and what values do you think we can bring to another organization? And then we will go out and look at potential partners going forward based on that,'" Heywood said.
Aspirus was able to sell St. Luke's on its strength of being a rigorously structured integrated system, which allowed it to secure the merger and expand its presence into Minnesota, according to Heywood.
Aspirus continues to take that mindset as it seeks out other opportunities, asking what key attributes it's looking for and if it believes its own attributes can add to an organization.
"It helps us make decisions, but it also helps others when we're talking to them to see the value of partnering with us or choosing not to, depending on the value that they see and what we bring," Heywood said.
Recognize cultural fit
A deal can make all the sense in the world and look good on paper, but if it doesn't align from a cultural standpoint, then it's not worth putting pen to paper, both Banos and Heywood stated.
"Just buying something that provides a service but doesn't necessarily see the value of integrating within your organization would have a lot of disruption for us," Banos said. "So we're very, very careful when we look at a practice or look at an opportunity."
When looking at an opportunity that doesn't share similar vision or values, even if competing organizations may also be in pursuit, you have to be willing to say, 'no thanks' and move on.
"Even though we might need that service, it's just not a strategic fit from the culture of the organization," Banos said.
In the long run, that perspective, along with these other approaches to M&A, will lead you to a quality deal.
The agreement involves two of the 11 bargaining units taking part in healthcare strikes across Providence.
Providence Medical Group has struck a tentative agreement with two units represented by the Oregon Nurses Association (ONA) while thousands of other workers remain on strike.
The deal is for Portland-based Providence Women's Clinic, which is handing physicians and nurses first-ever contracts that improve areas like compensation, benefits, and working conditions.
A ratification vote on the agreement by union members began on Monday and closes on Tuesday.
Nearly 5,000 Providence doctors, nurses, advanced practice providers, and midwives at eight hospitals and six clinics run by Providence went on strike on January 10, making it the largest healthcare strike in Oregon's history, according to the ONA. Including the two units that Providence Women's Clinic reached a deal with, 11 bargaining units in total are participating in the strike.
Oregon Gov. Tina Kotek helped facilitate the agreement by requesting that Providence and the ONA resume mediation.
"This agreement marks a significant milestone in our commitment to providing exceptional healthcare services," Providence said in a statement.
The terms reached for nurses include a 25-step wage scale based on years of experience, providing a pay raise of 4% to 20% for most nurses. They'll also receive additional pay for evening shifts, precepting, and per diem work.
Meanwhile, physicians will receive raises of 7.5% to 15% for advanced practice providers, as well as protections for physician time and competitive incentives for extra work.
Though the agreement is a step in the right direction, Providence still has its work cut out to resolve the strike for all.
"Our members have made significant sacrifices to stand up for fair wages, safe staffing and the ability to provide quality care to their patients," Charlie Saltalamacchia, MD, said in a union release. "This agreement at Providence Women’s Clinic proves that solutions are within reach when Providence negotiates in good faith and prioritizes investment in their most valuable asset; their caregivers. The same commitment to fair bargaining must be extended to all remaining negotiations so that every caregiver can return to work with dignity and respect."
