Becker's ASC Review

22 HEALTHCARE NEWS 22 Reasons for optimism in hospital finances By Laura Dyrda T he last 12 months have been challenging for many hospitals and health systems as margins remained tight and federal policy changes directly impacted hospital funding. But things may be looking up. Strata released its "Monthly Healthcare Industry Financial Benchmarks" report for December on Feb. 4, based on data from more than 1,900 hospitals, noting hospital revenue and margin increases. While results are still uneven and uncertainty, especially around supply expenses and policy changes, persists, health system executives are still finding ways to build for a more stable financial future. "Our top priority for 2026 is striking a sustainable balance between financial stability and growth through smart, efficient practices," Pete November, president and CEO of Ochsner Health in New Orleans, told Becker's. "For Ochsner Health, this means using our culture of innovation and operational excellence to improve efficiency without compromising high-quality care. By standardizing processes across the system and reinvesting savings strategically, we can expand access, enhance experiences and streamline throughput without escalating costs." He also sees investing in Ochsner's team as critical to future growth. "rough the prioritization of innovation, continuous learning and strategic partnerships, we empower our people to deliver exceptional care while preparing for the future of healthcare with both optimism and urgency," said Mr. November. "is proactive, collaborative approach is critical to navigating the complexities of the industry while staying true to our mission." e numbers back up Mr. November's mindset. Based on Strata's report, additional reasons for optimism include: 1. Hospital revenues strengthened last year. Gross revenue was up 11% in December and outpatient revenue increased yearly 13%. Inpatient revenue also rose nearly 8% in December and overall revenue is growing faster than expenses. 2. While hospital expenses increased 7% year over year in December, total expenses per adjusted discharge declined 4% from November to December. Labor expenses per adjusted discharge dropped 0.4% year over year and 5% month over month. 3. Hospitals reported moderate per-patient revenue gains, with net patient service revenue per adjusted discharge increasing nearly 2% year over year. 4. Patient demand for care remains strong and hospitals are finding ways to accommodate additional capacity. Inpatient admissions rose overall 4% year over year and outpatient visits increased just over 7%. At the same time, observation visits declined slightly and emergency visits dropped 4%. 5. Hospital operating margins increased nearly 5 percentage points month over month and 1 percentage point year over year. Hospitals in most regions reported modest changes, but in the northeast hospitals reported an almost 6 percentage point margin increase year over year. John Couris, president and CEO of Florida Health Sciences Center at Tampa General Hospital, has made advancing initiatives to improve operating EBITDA a top priority this year. e health system has a "3/30" initiative to grow EBITDA by 3 points over the next 30 months while keeping quality high. "We will accomplish this by building highly reliable, innovative processes that anticipate inflationary pressures, workforce challenges and evolving payer dynamics, allowing us to strengthen our financial foundation without compromising care," said Mr. Couris. "By aligning our operational discipline with our quality journey and growth initiatives, we will create real value for patients, payers and employers, positioning Tampa General for long-term sustainability and success." James Hereford, president and CEO of Fairview Health Services at M Health Fairview in Minneapolis, told Becker's that his top priority this year is investing in growth that will improve patient access and value while maintaining financial stability. "We're keeping margins resilient by focusing on workforce stability, capacity management and operational excellence, creating room to care for more people without adding unnecessary complexity," he said. "With that foundation, we're able to invest by scaling areas like specialty and quaternary care and pharmacy services, while expanding smarter digital pathways into care. Every dollar of growth should strengthen our financial footing and make care easier, safer and more personal for the communities we serve." While there is room for optimism about the future, the December results also point to cause for concern. At the health system level, margins decreased for the first time in four months from 1.5% in November to 1.3% in December. "For healthcare leaders heading into 2026, it's a reminder that financial recovery remains uneven and highly sensitive to cost pressures," said Steve Wasson, chief data and intelligence officer at Strata Decision Technology. e steady expense increase also makes hospital leaders uneasy, with non-labor expenses increasing 9% year over year in December. Labor expense growth was more muted, at 4% as systems have focused strategies on recruiting internal teams, retention, talent pipeline growth and augmenting the workforce with technology. Hospital revenue gains were "not sufficient to offset cost pressures and the system level," according to the report, and uncompensated care remains elevated. In December, bad debt and charity care rose 7% year over year. Most hospital executives expect uncompensated care to increase in the next few years as ACA subsidies and Medicaid funding cuts go into effect. Hospital CEOs and CFOs are preparing for these cuts and continued margin pressure by doubling down on resilience. "At Henry Ford Health, our top priority for 2026 is balancing financial stability with bold transformation to meet demands of the [H.R.1] and the rapidly evolving healthcare landscape," Robin Damschroder, executive vice president, CFO and president of value- based enterprise at Henry Ford Health in Detroit, told Becker's. "Incremental improvements are not going to get us there. We need to make major investments in clinical care and operations, especially as AI implementation surges within the healthcare industry, creating opportunities to significantly reduce administrative burdens and improve care delivery." n

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