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Financial Health of Hospitals

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Financial Health of Hospitals

Hospitals are being attacked across the United States for having huge profits.  The fact is every business whether for profit or not-for-profit must operate with a healthy, positive bottom line in order to remain viable.

Compared to most other businesses, hospitals have a very low operating margin and many hospitals even lose money. If you were a savvy business person, hospitals are not where you would want to invest, especially due to the vast uncertainty with CON law changes, sales tax exempt status questions and Medicaid reform. Additionally, there are very few if any other businesses that are as highly regulated as hospitals and who are required by law to provide services for free.  This is not to say that hospitals want to shirk their responsibilities of providing care to all - quite the opposite.  We are all in healthcare to provide care for patients, but the criticism that hospitals are solely to blame for rising healthcare costs is misdirected.

According to the American Hospital Association (AHA), U.S. hospitals provided $41.1 billion in uncompensated care in 2011.  The AHA also shows that one in four hospitals operates in the red.

  • Percent of hospitals with total negative margins: 24%
  • Percent of hospitals with negative operating margins: 28.4%
  • Percent of hospitals with negative patient margins: 49.7%
  • Percent of hospitals with negative Medicare margins: 54.4%
  • Percent of hospitals with negative Medicaid margins: 56%

Hospitals need a positive margin to continue to serve their patients and communities, but a four percent operating margin, which is what WakeMed aims to achieve, is not excessive to maintain a healthy hospital system.