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Health system operating margins drop 39%: Low demand for inpatient admissions, hospital-based surgeries

As hospitals lost key revenue-generating services to outpatient facilities, two-thirds of health systems saw their operating income drop between fiscal years 2015 and 2017, according to a Navigant report.

Navigant analyzed 104 health systems operating 47 percent of U.S. hospitals.

Here's what you should know:

1. Twenty-two health systems had three-year operating income reductions of more than $100 million each. Twenty-seven percent of the health systems lost revenue on operations during at least one of the three years analyzed.

2. Health systems lost a total of $6.8 billion in operating earnings, a reduction of 44 percent, during the three-year period. For-profit margins fell 39 percent, and nonprofit margins fell 34 percent.

3. Hospital revenue growth slowed as demand decreased for hospital-based surgeries and inpatient admissions. Lawmakers and insurers shifted many of hospitals' revenue-generating services to outpatient settings.

4. Meanwhile, hospital expenses spiked as a result of strategic investments in population health management, EHRs and physicians. These investments were made to keep up with value-based reimbursement and federal requirements.

5. With these contributing factors, hospital expenses outpaced hospital revenue growth by 3 percentage points.

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