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Becker’s Healthcare Podcast
Hospital Margins, AI Strategy, and Value-Based Care with Laura Dyrda
00:12:25
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- [00:01]
Laura Derda
Exciting things are happening at Beckers Healthcare Stay ahead of industry trends with the new Beckers CFO plus Revenue Cycle Podcast your Go to source for insights from top healthcare finance leaders. Tune in wherever you get your podcasts and don't miss the 10th annual Health IT Digital Health RCM Conference happening September 30 to October 3, 2025 in Chicago. Join thousands of executives, engage with industry leaders and explore the future of healthcare innov. Learn more about our upcoming events@beckershospitalreview.com See you there.
- [00:38]
Scott Becker
This is Scott Becker with the Becker's Healthcare Podcast, Thrilled today to be joined by Laura Derda. Laura is one of the brightest, best leaders I get to work with. She heads up the editorial staff at Becker's Healthcare, just a fantastic leader. She joins us regularly to talk about some of the stories she's watching closely in healthcare. Well, why don't I tee it up and maybe take it away? What are some of the stories that you're watching closely currently?
- [01:06]
Laura Derda
Absolutely. Well, thank you so much, Scott. I think many of the stories we're watching closely is just looking at where hospitals and health systems are at today in a variety of fronts, but especially looking at the financial situation for them. I think the first half of 2025 hospitals and health systems saw lots of changes, but at the same time, you know, we did see some positive signs. I think we saw the average margin for nonprofit hospitals increase from 1.6% in May to 3.7% in June, according to Kauffman Hall. And that really indicates just how hospitals and health systems have been able to weather some of the quick uncertainties and changes that have happened this year, but continue to double down on the areas that they've been successful on becoming more efficient and bringing in additional revenue to their organizations. Kaufman hall also reported that the average hospital operating margin jumped around 15% year over year in June and about 5% month over month, while the operating EBITDA margin increased 6% in June compared to the same period last year. And we saw that net operating revenue per calendar day was up around 9% year over year, which outpaced expense increases, which were up just 6%. So that was good to see for the first half of the year. However, I know there are certainly some some clouds over the future, especially given some of the different changes coming down the pipe from policy at the state and national level, as well as looking at how different economic headwinds and in tariffs and those kinds of things could hit hospitals and health systems too. I think a lot of C Suite executives are thinking about that as they're looking at future planning and forecasting. We're looking at, you know, for the month of June, Drug expenses increased 12% year over year, which drove up the overall expenses. While labor expense, which used to be a huge, huge concern for organizations, increased just 4% overall in June. And so we're really seeing a lot of the efforts that hospitals and systems put into targeting, you know, fewer travel nurses and fewer travelers and really bringing on more of a pipeline for full time staff team members and figuring out how they can retain their talent, paying off to some degree there, as well as augmenting and supporting their teams with technology. So I wanted to point that out from Kaufman and we saw something similar from Fitch to Fitch reported nonprofit hospitals made incremental financial gains in the first half of the year. And you know, they really pointed out that the liquidity remains robust. For a large swath of hospitals across the country, the average was about 215 days cash on hand, while the cash to debt ratio reached 169.2%, which is an improvement from last year. And we're, you know, from that report we saw that some of those strengths could provide a cushion as there are future challenges. Again, looking at especially the 2025 US tax and spending bill and then thinking about how Medicaid changes and additional pressures could affect those organizations through 2027. So we're hearing that from the ground, from executives as well as, you know, these different firms that are looking into the future. That there is, you know, good news for now. But a lot of organizations are still seeing some of the volatility coming up and really strongly planning for the future.
- [04:37]
Scott Becker
Thank you very, very much. I saw the Kauffman hall report that showed margins were slightly up this year, actually up by a decent amount. I was a little bit surprised by that. Is that across the board or a small and mid sized system still struggling? I hear so much about rural and some of the urban and small, smaller systems struggling. Are we seeing more improvement across the board? Because I was actually surprised by that.
- [05:00]
Laura Derda
Yeah, absolutely. I think, you know, your kind of overall assessment is correct. I think there are definitely areas of the country as well as size of the organization makes an impact on their average margin improvement. So we did see double digit declines in operating margin in the west as well as the Great Plains region. You know, whereas for example, in the Midwest we saw 29% improvement. So I think, you know, you're definitely seeing some parts of the country especially perhaps that might have been most depressed in recent years seeing big gains. And that's the same, you know, was true for bed size of hospital. We saw, you know, hospitals with around 26 to 99 beds had operating margin increases of about 30%, while actually the bigger institutions with 500 bed plus saw a decrease of around 29%. And so it is surprising to some degree because you always think of, you know, those smaller hospitals as being in the biggest trouble. And while they're improving or making the biggest improvements, I think it's because they stood to make the biggest improvements here. And just because they did improve doesn't mean they're necessarily in a financially strong position. You know, I think a lot of these hospitals that are in rural areas and, you know, critical access hospitals or the, those that are smaller still do need lifelines in order to move forward. I think those are the places where the Medicaid cuts upcoming could have the biggest impact. And so I think it's been very much something that's top of mind. And so these organizations maybe have additional extra motivation to try to increase from where their position is at and get some of that extra cushion, whether it's from adding service lines, adding revenue, trying to figure out how they can make strategic partnerships to bring in technology that will make a difference and make them more efficient. We're seeing all of those things on the ground, especially organizations bringing in a couple of times a week, orthopedic services, cardiology, oncology, and leveraging virtual visits to stay in touch with those specialists when they're not in town. I think we hear over and over again that those are the spaces where the smaller hospitals are trying to figure out how to keep those patients within their communities to still deliver care. And that could be a boon for them in the future. But you're right, I think those are still the organizations and institutions that have the thinnest margins. And so, you know, just because they're making improvements doesn't mean they're out of the woods quite yet.
- [07:38]
Scott Becker
Thank you very, very much, Laura. Laura, in anything else, top of mind that you're, that you're looking at any of the top sort of things that you'll be thinking about come this fall's CEO Roundtable, anything that you're thinking of that's top of mind?
- [07:55]
Laura Derda
Yeah, absolutely. So, again, you know, a lot going on for us, especially CEO CFO Roundtable, and we're really excited this year to have a few new areas that we're focused on that we think will really be beneficial for hospital C suites and executive teams as they're planning for the future and thinking about what they really need to know in order to have a financially strong and thriving organization. I think first and foremost we have an AI summit that we've put together which really includes some of the top organizations that I'll be talking about. The things that they've been doing with artificial intelligence. Mayo Clinic, for example, have a strong presence presence there. And recently we caught up with a few of those different folks to see what is top of mind for them, what they see as being game changing right now. And automation of course is being used in many places. Generative AI and even agentic AI now is in a strong position with many hospitals and health systems. But what Mayo Clinic talked about was multimodal AI which now can process and integrate multiple data types such as images and text at once to perform more complex tasks than some of that single motive AI and generative AI. So technology see this as yet another way that they can level up their organizations, figure out how they can synthesize data across clinical text, those images, laboratory results, and then drive more real time decision support for clinicians. In figuring out how to translate those pilot programs into enterprise scale deployments is so critical. I think we hear so much from hospital C suite leaders that it's really a noisy place out in the AI healthcare environment. And so figuring out which companies to partner with, which pilots to take to scale and how to do that effectively and then actually get adoption from their teams, it's obviously the technology is one component of it, but really figuring out the governance and then driving adoption is another huge challenge. And then finally I think we're tackling discussions in real world examples and advice and connecting points around how to measure the success of AI initiatives within organizations. It might not look the same as, for example, measuring the KPIs for clinical outcomes or revenue cycle efficiencies and those kinds of things, but figuring out how to measure the impact of AI and truly get that into a space where they know their investments are making a difference and they're getting what they need from their artificial intelligence capabilities is, you know, true focal point for us. And so we're focusing on those metrics, we're focusing on operational, you know, governance structures and then we're also focusing on just strategically how C suite leaders should be thinking about artificial intelligence in the future. So that's one area. And then the second one I wanted to mention really briefly here is also, you know, looking at, we're having for the first time ever, a value driven care delivery forum that makes you know, is focused on how hospitals and health systems who have been doing value based care, who have been thinking about population health and been effective with it in recent years, what they're doing, how they're looking at the future in what, you know, they can really boil down to some of the challenges upcoming in terms of, again, measuring success, figuring out how physician employment, as well as pay models are being structured differently and what they really need to do from a strategic level to actually realize this transition is not just, you know, talk about it and not just thinking about, hey, in the future, this is important, but really bringing it into, you know, the action items of today so it's integrated within the overall way that health system leaders are thinking about it. Because given the current headwinds, you know, there's just not many other options for some places except for to figure out how to bring those value based principles into their broader organization so that they can be thriving as the healthcare world changes.
- [12:09]
Scott Becker
Laura, thank you so much for visiting with us today on the Beckers Healthcare podcast. Always fantastic. Thank you very, very much. Just, just love getting a chance to catch up with you. Thank you.
- [12:19]
Laura Derda
Thank you, Scott. It's been a pleasure.