Hospital Margins Fall in August as Bad Debt, Costs Rise
Kaufman Hall's National Hospital Flash Report, based on data from more than 1,300 hospitals, shows year-to-date operating margins fell to 2.5% including allocations through August, down from 3.8% through July, with August's monthly margin of 1.8% the weakest since February. Gross operating revenue grew 9% year-over-year, but net revenue growth lagged at 6%, reflecting a widening gap driven by payer adjustments, write-downs and a shift from commercial to Medicaid coverage at some systems. Non-labor costs, especially drugs and supplies, rose faster than revenue, with drug expenses at the largest hospitals up nearly 22% year-over-year per adjusted discharge. Bad debt and charity care climbed 13% year-over-year and are up 49% compared with 2023, a trend Kaufman Hall links to payer mix erosion.