Becker's Hospital Review

9 CFO / FINANCE Medicaid base rate has not changed in 33 years. His hospital pays roughly $28 million into the hospital assessment fee program and receives approximately 56 cents on the dollar in return. Nine Indiana hospitals have closed or ended inpatient services over the past decade, including four since 2020, according to the Indiana Hospital Association. Since January 2025, 14 Indiana hospitals have reduced services, consolidated with larger systems to preserve local access or cut staff to remain operational. e state has also lost 16 hospital obstetric programs since 2020. Kyle Kramer, president and CEO of Day Kimball Health in Putnam, Conn., operates with a 70% to 75% Medicare and Medicaid payer mix. His hospital loses money on obstetric deliveries and behavioral health. He has been pursuing an affiliation with the University of Connecticut health system. "We have zero negotiating leverage with third-party payers," Mr. Kramer said. e Federation of American Hospitals has warned that the industry is "moving in the opposite direction" on access and coverage, with Medicaid cuts and ACA subsidy uncertainty compounding simultaneously. Many hospital leaders agree that cost-cutting as a survival strategy has run its course. e path forward — if there is one — runs through growth, advocacy and harder decisions in the boardroom about which services a community can actually sustain. "We cannot cut our way to success," Mr. Hodshire said. "We've already cut to the bone. We have to look at new and innovative ways to lead." Hospital associations are making the same argument to lawmakers. "We need to revisit some of the incredibly challenging provisions of HR 1," Ms. Stallings told Becker's. "We know there are significant cuts planned across the country, and I believe lawmakers are continuing to hear from hospitals, other providers and constituents about their concerns. I remain hopeful, and we will certainly continue our advocacy efforts to mitigate some of the most damaging aspects of HR 1." e Medicaid cliff is not arriving all at once. But the financial pressure, the coverage disruption and the uncompensated care burden aren't waiting for 2027 to begin. n Hospital margins improve but lag behind 2025: 5 notes By Laura Dyrda A verage nonprofit hospital margins improved slightly in March but remain sluggish compared to 2025, according to Kaufman Hall's most recent "National Hospital Flash Report." The firm, a Vizient company, gathered data from 1,300 hospitals and released findings May 18. Five things to know: 1. Average hospital operating margins hit 2.9% in March, up from 1.8% in February and 2% in January, but still well below the 6.3% recorded in December. Margins rose 2 percentage points year over year, though they remain down 9 percentage points year to date compared to 2025 — a sign that the recovery, while real, is incomplete. "Operating margins improved month-over-month but remain below 2025," the report noted. "While bad debt and charity care declined month-over-month, gross revenue continues to outpace net, highlighting eroding payor mix." 2. The charity care burden eased in the near term but remains historically elevated. Bad debt and charity care per calendar day increased 18 percentage points year over year in March, though they fell 5 percentage points from February. Since 2023, bad debt and charity care have risen 46 percentage points and are up 18 percentage points as a percent of gross operating revenue. 3. Revenue growth was a bright spot in the report. Net revenue per calendar day increased 8 percentage points year over year and 5 percentage points month to date compared to 2025, driven primarily by outpatient activity — up 12 percentage points year over year. Inpatient revenue grew 7 percentage points over the same period. "March was the best month for hospitals in 2026 so far, despite mixed volumes," the report noted. "Year-over- year discharges rose while patient days grew slightly, indicating increased focus on improving average length of stay and continued shift to outpatient care." 4. Expense growth largely tracked revenue, rising 7 percentage points month over month and year to date compared to 2025. Supply expenses per calendar day jumped 11 percentage points year over year while drug expenses grew 10 percentage points. Labor costs showed more restraint, up just 4 percentage points month over month and year to date compared to 2025. "Favorable improvements across the board are likely correlated to the decrease in average length of stay," the report stated. "However, drug expenses remain a primary driver of expense growth year-to-date." 5. Regional performance varied considerably. Here is the breakdown for year-over-year change in March: • West: 23 percentage point drop • Midwest: Flat • South: 5 percentage point growth • Northeast / Mid-Atlantic: 3 percentage point growth • Great Plains: 11 percentage point drop n

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