In this week’s graphic, we use data from Kaufman Hall’s National Hospital Flash Report and Syntellis Market Insights to assess the current state of hospital operating margins. While the median hospital operating margin rose to nearly 2% in 2023, there is a widening gap between the operating margins of the highest- and lowest-performing hospitals: nationwide, hospitals in the 95th percentile posted operating margins around 26%, while those in the bottom fifth percentile saw operating margins of around negative 19%. There is also fairly significant variation at the regional level. In general, hospitals in the West and Northeast struggled more across 2023, stemming in part from higher labor costs, some of which can be attributed to differences in state regulations. Hospitals in the South saw the largest gap in relative margin difference between their best and worst-performing hospitals. We expect the margin spread between the highest- and lowest-performing hospitals to continue to widen, as systems with stronger financials fund outpatient service expansion and strike new partnerships in their quest for continued growth and profitability, while hospitals with weaker financials are unable to reinvest in themselves and struggle to keep their doors open.
