High labor costs, weak margins continue at nation’s nonprofit hospitals

Editor's Note

An October 2023 report from Fitch Ratings finds that nonprofit hospitals will continue to have weak operating margins into 2024 and need to control labor costs in order to return to stronger margins, Chief Healthcare Executive October 5 reports.

Some highlights of the report include:

• Median operating margins dropped from 3% in 2021 to 0.2% in 2022, while operating EBITDA [Earnings Before Interest, Taxes, Depreciation, and Amortization] margins fell from 8.9% to 5.8%.
• Hospitals continue to rely on contract labor which is driving up labor costs.
• Operating margins are on the upswing with improved hospital revenue in outpatient care, although margins remain below historical levels.
• About 5 million people have lost Medicaid coverage, another financial strain on hospitals. 

The effects of the COVID-19 pandemic continue to be felt at hospitals and health systems, according to the report, and nonprofit hospitals will need to take steps to ensure a full financial recovery.