Minnesota hospitals’ operating margins fell to 1.4% in 2019, marking the sixth consecutive year of decline, according to a report released Thursday by the Minnesota Hospital Association.
Hospitals are facing financial challenges from declining federal and commercial reimbursements, health care workforce shortages and rising costs of pharmaceuticals, medical devices and technology, according to the report.
Although the report doesn’t include complete 2020 data, a preliminary survey found that operating margins dropped to -5% in the second quarter of 2020 and rebounded to 3.5% in the third quarter. Operating margins measure an organization’s revenues compared to expenses from patient care.
The 2019 report “signals a financially fragile health system in Minnesota, even before the additional significant challenges presented by the global pandemic in 2020,” Dr. Rahul Koranne, president and CEO of the Minnesota Hospital Association, said in a statement.
Thirty-one of the 76 hospitals included in the report — 41% — had negative operating margins in 2019, up from 27 the year before.
Urban hospitals have had higher margins than rural hospitals in the past, but urban hospitals have seen steeper decline in recent years. In 2019, rural and urban hospitals’ operating margins were equal for the first time in at least six years, at 1.4%.