Hospital performance showed continued stability in 2024

Author(s):

Todd Shryock

Key Takeaways

Hospitals experienced financial stability in 2024, with increased outpatient revenue and fewer patient observation days, despite rising expenses.
Bad debt and charity care volumes increased, attributed to reduced public insurance enrollments and higher coverage denials.
Physician payment and productivity rose, but reimbursement challenges indicate traditional fee-for-service models may be unsustainable.
Alternative risk-sharing structures, such as value-based models, show promise in increasing revenue without relying solely on greater physician output.

Expenses continued to rise throughout the year, but they did not outpace inflation

Hospital performance showed stability in 2024: ©Spiroviewinc - stock.adobe.com

Hospitals’ financial and operational performance showed continued stability in 2024, with increased outpatient revenue compared to 2023 and fewer patient observation days, the number of days patients spend under hospital monitoring without formal admission, according to Kaufman Hall’s National Hospital Flash Report. While expenses continued to rise throughout 2024, they did not outpace inflation on a volume-adjusted basis.

The report found that bad debt and the volume of charity care provided by hospitals in 2024 increased. Experts at Kaufman Hall say this may be due to fewer people being enrolled in public insurance programs like Medicaid as pandemic-era coverage protections expired, as well as increased rates of coverage denials by insurers.

“While it’s encouraging to see continued stability in hospitals’ financial well-being over the past 12 months, historically slim margins indicate hospitals are not yet in a fully sustainable position,” said Erik Swanson, senior vice president and data and analytics group leader with Kaufman Hall. “The uptick in bad debt and levels of uncompensated care provided by hospitals will be an indicator to monitor over the next several months. On the workforce front, we continue to see a competitive and tight labor market across the health care sector.”

Physician payment and productivity also rose in the final quarter of 2024, according to Kaufman Hall’s quarterly Physician Flash Report. The median subsidy paid by hospitals to practice groups reached $306,792 per employed physician. Experts said that while physician output and productivity rose, reimbursement remains a challenge and an indication that traditional fee-for-service models may not be sustainable.

“This data shows us that, while physician payment is rising, providers are working more while generating less revenue per unit of work,” said Matthew Bates, managing director and physician enterprise service line leader with Kaufman Hall. “Looking ahead, alternative risk-sharing structures like value-based models have shown promise—particularly in primary care—in increasing revenue without solely relying on greater output from doctors.”

Kaufman Hall’s National Hospital Flash Report draws on data from more than 1,300 hospitals from Strata Decision Technology LLC. The Physician Flash Report draws on data based on more than 200,000 providers, also from Strata.