Becker's Hospital Review

11 CFO / FINANCE Health systems on average aren't breaking even By Laura Dyrda M ost U.S. health systems are still operating in the red, even as a handful of standouts post stronger numbers to start the year. While some systems, including large for-profit operators and nonprofits like Clearwater, Fla.-based BayCare and Rochester, Minn.-based Mayo Clinic, reported margin spikes to begin 2026, the broader picture tells a different story. According to Strata Decision Technologies, which gathered data from more than 1,900 hospitals to track financial performance, the average year-to-date operating margin ticked up only slightly, from -0.6% in January to -0.3% in February. "While margins showed modest improvement in February, the underlying pressures facing healthcare leaders remain significant," said Steve Wasson, chief data and intelligence officer at Strata Decision Technology. "Sustained expense growth and uneven patient demand are contributing to a challenging environment, reinforcing the need for healthcare leaders to better anticipate future performance and ensure their organizations thoughtfully manage expenses and align resources and care delivery with changing utilization patterns." Hospital operating margins were essentially flat for the first two months of 2026, but dropped 1.3 percentage points year over year in February. The pain wasn't evenly distributed — smaller hospitals absorbed the biggest hits, while larger systems largely held their ground. Among hospitals with 500 or more beds, margins actually grew 0.5 percentage points. At the other end of the spectrum, hospitals with 26 to 99 beds saw the steepest decline, dropping 3.5 percentage points year over year. The full breakdown by bed size, according to Strata's data: • 0-25 beds: 2.3 percentage point drop • 26-99 beds: 3.5 percentage point drop • 100–199 beds: 1.1 percentage point drop • 200–299 beds: 0.2 percentage point growth • 300–499 beds: 1.3 percentage points drop • 500 beds or more: 0.5 percentage point growth On the revenue side, hospital gross operating revenue jumped 6% year over year, with outpatient revenue leading the way at 7.2% growth. But expenses kept pace — rising 5.7% overall, driven largely by a 7.6% surge in supply and drug costs. Labor expenses were a relative bright spot, growing just 4% year over year in February. Contract labor as a share of total labor expenses remained relatively flat, and overtime hours as a percentage of productive hours dipped 7.4% year over year. n those discussions, the same thing goes with capital. Everyone wants the latest and greatest technology, but making sure that when we put it down on paper is the return there, that, yes, we're providing the care that our patients need, but we're also going to generate the volume and growth that we anticipate. e second piece of that is actually following up on that and saying, "Hey, great, we have a pro forma, but then aer implementation, are we realizing what we thought we would from this, or do we need to kind of take another look at our game plan? Where did we miss it and what can we learn from that?" Jenni Alvey. CFO of IU Health (Indianapolis): We think of it here almost as like two different things, our operating engine, and how we generate the resources that sustain care, access, affordability and reinvestment in our people. Based on near-term headwinds, [there's] a lot of reimbursement pressure, labor cost utilization shis, that require continuous optimization because margins are thin. We also have to think about our strategic engine, the investment engine and the balance sheets. at engine converts that discipline risk into a long-term compounding for mission reinvestment. It supports the investments and facilities, technology and growth. ings like our new adult academic health center campus, regional growth projects and implementing Epic to the new EHR. at is what really stabilizes an organization when operational winds shi. You have to be highly focused on both, and be thoughtful about how you're preparing for the future. I think both of those engines are essential, and one kind of defines the pace of flight, and the other helps us maintain the altitude over time if you think about it from an overall operational perspective. Perry Sham. CFO of Niagara Falls (N.Y.) Memorial Medical Center: I think the role, rather than being the lead as a strategist, is a connector. How do you pull together clinicians, departmental managers and stakeholders, and move them in a direction for the organization? Sometimes you will bring up a new service or work through a new initiative, and a big part of the job isn't necessarily to make the decisions of that, but it's to pull the right folks together and provide them with the information needed to drive that initiative. Robert Chestnut. Senior Vice President, CFO of LMH Health (Lawrence, Kan.): Working hand-in-hand with the CEO to understand their vision on what you're trying to do [is key]. … You've got to work in concert with your leader to figure out what their vision is. ere's always a thousand things to do. How do I focus? How do I work collaboratively with the management team to say, "Let's figure out what are the most important three or four things." One thing I try to do is put numbers to that. What are the biggest bangs for the buck and initiatives that we can undertake in any given year? ere are always more initiatives than there is time to do it. Let's figure out the things we can get some early wins on, and things that we think will transform the organization, versus trying to push 20 things at a time. Todd Roberts. CFO of Cheshire Medical Center (Keene, N.H.): I think it's having an important relationship with our CEO, being open and engaged. It's not just a CFO crunching numbers anymore, it's being strategic and really buying into the overall mission and vision of the organization. We just went through a refresh on that with our board of trustees approving it, which really aligns with what I have looked for in a career. n

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