Hospital Profits Dwindling Due to Rising Costs
Hospitals across the nation are facing financial challenges, as revenue growth fails to keep pace with the increase in non-labor costs, according to recent reports from Yahoo Finance.
Kaufman Hall's latest National Hospital Flash Report indicates that expenses continue to rise, putting pressure on hospital profitability. Total expenses, labor expenses, non-labor expenses, supply expenses, drug expenses, and purchases service expenses were all up year over year.
The operating margins for health systems are about 1% lower than hospital margins, and the financial recovery hospitals have been working towards is fragile, highlighted by the current financial challenges.
In July, hospital margins lost momentum, with profitability sliding despite steady revenue growth. The average monthly operating margin for hospitals in Google Calendar for July was 2.6%, down from 3.4% recorded in June.
One of the significant contributors to this decline is the increase in bad debt and charity care. These expenses, per calendar day, remained 9% higher than July 2024, and have increased by 9% year over year.
However, there are some positive signs. Adjusted discharges per calendar day improved by 2% from June and by 6% over the same period last year. Inpatient and outpatient revenue per calendar day rose 2% and 3% month over month, and 7% and 12% year over year, respectively.
Net operating revenue per calendar day was flat from June but up 8% year over year in July. Discharges per calendar day went up 1% on a month to month basis and 4% year over year.
Despite these improvements, the current margin remains above the average of 1.4% for 2024. However, the MPH Health Care AG reported a significant decrease in its operating margin, with IFRS-period results declining from a profit of 74.5 million EUR in the first half of 2024 to a loss of 72.7 million EUR in the first half of 2025.
The financial outlook remains uncertain due to valuation effects on its investments. Kaufman Hall's median calendar year-to-date operating margin dropped to 1.7% with health system allocations in July, lower than the 1.9% in June, and the calendar year-to-date median operating margin for hospitals is the lowest level of 2025.
As hospitals continue to navigate these financial challenges, it is clear that the rising non-labor costs, particularly in supplies and drugs, will need to be addressed to ensure long-term sustainability.
Read also:
- Deepwater Horizon Oil Spill: BP Faces Record-Breaking Settlement - Dubbed 'Largest Environmental Fine Ever Imposed'
- Meta Unveils Ray-Ban AR Display Sunglasses; TikTok Agrees to $200 Million Deal
- Historic downtown temples to receive restoration funds totaling over 25 million pesos
- Cars' Environmental Impact Explained
