Healthcare Leadership Trends for 2025
Divergent Experience and Outlook Analysts parsing the numbers have uncovered a substantial divergence in financial health among organizations. From mid-2023 to mid-2024, operating margins ranged from 8% to 32% for hospitals in the 60th to 95th profitability percentile versus 2% to negative 19% for those below the 40th percentile. 1 Rural healthcare continues to be in crisis with 700 hospitals at risk of closure due to finances — over half in immediate danger. 2 Other sectors display similar economic divergences. Over one-third of skilled nursing facilities had a 2023 margin of -4.0% or worse and a nearly equal percentage registered 4% or higher. 3 Many Problems May Be Structural and Take Longer to Solve Leaders worry that critical financial and operational challenges are not transitory. Rather, they appear “baked in” and resistant to near-term improvement. Moody’s believes “the steep rise in healthcare wages over the least three years remains a structural problem and credit risk for the hospital industry.” 4 Advisory Board echoes the term “structural” to characterize labor conditions such as higher workloads and lingering burnout that cause persistent “slower throughput and reduced capacity.” 5 Fitch refers to a ”fundamental disconnect” between revenue and expenses that may be “here for the long term.” 6
1 Advisory Board, “The State of the Industry Heading into 2025,” October 3, 2024. 2 Center for Healthcare Quality & Payment Reform, “Rural Hospitals at Risk of Closing,” July 2024. 3 Clifton Lawson Allen, 39th SNF Cost Comparison and Industry Trends Report, October 10, 2024. 4 L. Dyrda, “Hospital Operating Margins to Stay Low in 2025: Moody's,” Becker’s Hospital CFO Report, October 16, 2024 5 Advisory Board, “The State of the Industry Heading into 2025,” October 3, 2024. 6 A. Condon, “Hospital Margins' 'New Normal',” Becker’s Hospital CFO Report, August 12, 2024.
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