Hospitals are facing thin margins, workforce challenges

To better understand how healthcare organizations are navigating the current environment, Becker's Healthcare and LeanTaas partnered to survey CFOs and senior finance executives at U.S.-based hospitals and health systems.

The survey included responses from 100 hospital and health system finance leaders, including CFOs, VPs of finance, and directors of finance. Almost half (46%) of respondents were from health systems, and 37% were from community hospitals. Almost two-thirds of respondents worked at hospitals or systems with more than 300 beds.

Currently, most health systems are facing significant financial pressure with their operating margins. In the survey, 72% of respondents described their organization's operating margins as thin (1% to 2%) or worse (<1%).

Although 26% said their margins improved compared to last year, the gains were modest, and margins were largely still in the 1% to 2% range. An additional 24% of respondents said thin margins were now the "new normal," while 22% said their margins worsened, falling below 1%.

When asked to identify their top financial pressures, respondents most frequently cited declining reimbursement rates/unfavorable payer mix, reduced federal or state funding, and increased regulatory and policy risk. Inflationary pressures and growing labor costs also continued to negatively impact financial performance, making labor expenses a key priority for leaders. 

"Rather than expanding physical footprint or adding staff, finance leaders are increasingly focused on making better use of the capacity and workforce they already have," Becker's and LeanTaas wrote. "… Optimizing throughput, aligning staffing with demand, and reducing idle or bottlenecked capacity are increasingly seen as core drivers of financial performance, not just operational efficiency."

Many leaders also reported moving from strategy to execution with their technology investments. For example, almost two-thirds of respondents (64%) said AI-enabled operational solutions are already either being implemented at their organization (19%), piloted (29%), or planned in the next 12 months (16%). In addition, over half of respondents (56%) said they are very or somewhat confident in their ability to sustain technology investments even with ongoing margin pressure. 

Shannon Bibbins, a director at Optum Advisory, also highlighted the importance of technology when it comes to optimizing operations.

"As hospitals strive to meet increasing patient demands and rising operational complexities, leveraging technology tools and AI has become essential for optimizing clinical workflows," Bibbins said. "By integrating advanced digital solutions, such as AI-driven automated documentation and predictive analytics, hospitals can significantly reduce manual processes that often lead to bottlenecks and errors."

"This digital transformation not only enhances efficiency and productivity but also allows clinical staff to focus more on patient care rather than administrative tasks, ultimately driving better health outcomes and operational sustainability," Bibbins added.

*Advisory Board is a subsidiary of Optum. All Advisory Board research, expert perspectives, and recommendations remain independent.