With Hospitals Under Financial Pressure, Payers May Soon Feel Rate Squeeze

Many of the largest U.S. hospital systems reported negative net income from 2022, a list that includes Kaiser Permanente, Mass General Brigham, and the Cleveland Clinic, each of which lost at least $1 billion. Although some prominent hospital systems’ red ink is due to negative investment income, the latest available data suggest that inpatient volumes are down from their pre-pandemic baseline and are likely to stay that way. As a result, experts tell AIS Health, a division of MMIT, hospitals are likely to be even more aggressive with payers than they have been in recent rate negotiation rounds to replace some of that lost revenue and expired federal pandemic relief funds.

Consulting firm Kaufman Hall & Associates, which compiles monthly indices of hospital finances, found in a March 28 report that the median hospital operating margin was -1.1% in February, a slight decrease from January’s -0.8%. The report added that “due to external economic factors, relatively flat margins are likely to continue in the near term.”

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Peter Johnson

Peter Johnson

Peter has worked as a journalist since 2011 and has covered health care since 2020. At AIS Health, Peter covers trends in finance, business and policy that affect the health insurance and pharma sectors. For Health Plan Weekly, he covers all aspects of the U.S. health insurance sector, including employer-sponsored insurance, Medicaid managed care, Medicare Advantage and the Affordable Care Act individual marketplaces. In Radar on Drug Benefits, Peter covers the operations of (and conflicts between) pharmacy benefit managers and pharmaceutical manufacturers, with a particular focus on pricing dynamics and market access. Before joining AIS Health, Peter covered transportation, public safety and local government for various outlets in Seattle, his hometown and current place of residence. He graduated with a B.A. from Colby College.

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