Despite higher inflation and dwindling COVID-19 relief funding from the federal government, the nation's three largest for-profit health systems so far this year have operating margins that meet or exceed levels in 2019 before the pandemic.
Industry reports had suggested that the outlook for hospitals and health systems has deteriorated in 2022 because of the ongoing effects of the pandemic (such as labor shortages), decreases in government relief and broader economic trends that have led to rising prices and investment losses.
KFF recently examined the financial performance of HCA Healthcare, Tenet Healthcare Corp. and Community Health Systems, which collectively account for about 8% of all community hospital beds nationally. Operating margins reflect the profit margins earned on patient care and other operations of a given health system — such as from gift shops, parking and cafeterias — and incorporate government COVID-19 relief funds.
HCA and Tenet had positive operating margins throughout the pandemic, and CHS had positive operating margins in all but two quarters of the pandemic:
- HCA has had operating margins of at least 10% during the majority of the pandemic (9 out of 11 quarters).
- Tenet has had operating margins of at least 5% for the majority of the pandemic (9 out of 11 quarters).
- CHS's operating margins have been lower (less than 5% for 9 out of 11 quarters). CHS had lower margins than the other systems before the pandemic as well.
Stock prices increased and then decreased during the pandemic. HCA and Tenet stock prices have increased overall since January 2020, while CHS stock prices have decreased. As of November 8:
- HCA and Tenet stock prices increased overall relative to January 2020 (by 44.6% and 12.6%, respectively).
- CHS stock prices decreased by 11.5% during the same period, although CHS also has experienced longstanding financial challenges that predate the pandemic.
Related: America's hospitals facing 'massive growth in expenses'
"Industry reports have suggested that hospitals had high margins in 2020 and 2021 but have faced significant financial challenges in 2022," the report concludes. "Our analysis adds nuance to this discussion. So far this year, operating margins among the three largest for-profit health systems in the country have met or exceeded pre-pandemic levels.
"While some hospitals are struggling in the current environment — with high inflation and the ongoing burdens posed by COVID-19, flu, and respiratory syncytial virus (RSV) — our results indicate that the largest for-profit systems have had operating margins that exceed pre-pandemic levels."
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