Although the first half of 2024 is shaping up to be a positive one for median hospital operating margins, the industry is still reeling from a period of unprecedented financial difficulty. In this week’s graphic, we highlight nearly 30 years of historical data from Kaufman Hall and the American Hospital Association to provide a broader perspective on hospital operating margins. 40% of hospitals operated in the red in 2023, which is an improvement from 2022 when 53% of hospitals posted a negative operating margin, but still a sign that many hospitals have yet to recover from the financial challenges prompted by the pandemic. During previous periods of recent economic hardship, including the “dot-com bubble burst” of the late 1990s and the 2008-09 Great Recession, the share of hospitals with negative operating margins amounted to 42% and 32%, respectively. The median hospital margin in 2023 of 2.3% was lower than the median operating margin of 3.3% in 2008. In the first half of 2024, operating margins are just getting back above the 4% level—the level needed for health systems to not only sustain operations but also invest in growth. But post-pandemic recovery has been uneven, and we expect the spread between the highest- and lowest-performing hospitals to continue to widen, as hospitals with stronger financials explore pathways to advance their success and those with weaker financials struggle to maintain operations.
