Bucking the trend: Some hospitals achieving higher margins than before the pandemic
Three of the biggest for-profit hospitals achieved positive margins through the third quarter of 2022, even exceeding pre-COVID-19 levels. Their financial results are in stark opposition to several dismal reports about hospitals’ operating environments.
The results come from an analysis by the Kaiser Family Foundation, which examined operating margins among HCA Healthcare, Tenet Healthcare and Community Health Systems. Together, these three health systems accounted for 8% of community hospital beds in the United States in 2020. According to KFF, all three health systems had positive operating margins and exceeded pre-pandemic levels for the majority of the pandemic, including the most recent three-month quarter in 2022.
“HCA and Tenet had positive operating margins throughout the pandemic, and CHS had positive operating margins in all but two quarters of the pandemic (with one of those quarters being at the very beginning of the pandemic),” the analysis found.
Those results buck recent reports of dire financial challenges for hospitals throughout 2022. Another major health system, Cleveland Clinic, also recently reported it has lost $1.5 billion through the first three quarters of 2022. While many struggling hospitals and health systems have cited significant economic headwinds, including inflation and higher costs, labor strains and lost revenue in patient mix, the largest for-profit hospitals seem to be doing just fine.
The three health systems in KFF’s analysis saw operating margins exceed pre-pandemic levels in 9 out of 11 quarters since the onset of the pandemic. HCA and Tenet both saw their margins dip below their 2019 operating margins during two quarters in 2020, while CHS’ margins fell during the first quarter of 2020 and the second quarter of 2022 before increasing again.
“As of the third quarter of 2022, operating margins were 11.4[%] for HCA, 8.4[%] for Tenet, and 1.2[%] for CHS,” the analysis found.
With operating margins remaining elevated for the three health systems, stock prices, which generally reflect investors’ evaluation of future earnings, also largely increased. HCA and Tenet stock prices have risen overall since January 2020, while CHS stock prices have fallen. However, all three saw their stock prices rise before falling throughout the pandemic. Stock prices “increased dramatically during the first 1.5 to 2 years of the pandemic,” KFF reported.
According to KFF, its new analysis adds “nuance” to the discussion of hospitals’ operating margins and overall financial performance throughout the pandemic.
“While some hospitals are struggling in the current environment—with high inflation and the ongoing burdens posed by COVID-19, flu, and respiratory syncytial virus (RSV)—our results indicate that the largest for-profit systems have had operating margins that exceed pre-pandemic levels,” KFF stated.
Amy joined TriMed Media as a Senior Writer for HealthExec after covering home care for three years. When not writing about all things healthcare, she fulfills her lifelong dream of becoming a pirate by sailing in regattas and enjoying rum. Fun fact: she sailed 333 miles across Lake Michigan in the Chicago Yacht Club "Race to Mackinac."