37 Percent of Pennsylvania Hospitals Posted Negative Operating Margins in 2024

Newly released data from the Pennsylvania Health Care Cost Containment Council (PHC4) shows that 37% of the Commonwealth’s general acute-care hospitals posted a negative operating margin in 2024. 

The report shows that 14% of hospitals posted an operating margin between 0% and 4% and 49% posted an operating margin higher than 4%.

“While the data shows many Pennsylvania hospitals experienced relatively healthy margins in fiscal year 2024, 37% lost money on operations and 32% lost money overall,” said Barry D. Buckingham, executive director of PHC4, in a statement. “Also, the continued growth of uncompensated care remains a major concern for Pennsylvania hospitals.”

The data is in the first volume of a three-part series of financial reports published annually by PHC4. 

The statewide average operating margin increased from 2.26% in FY23 to 6.80% in FY24.

Regarding the margins observed in this report, Buckingham said, “The reasons for the significant increases identified in this year’s report are currently unclear. While the data reflects an upward trend, the underlying factors driving these changes have not been fully identified or analyzed. Further investigation is needed to pinpoint the specific contributors to this growth.”

Under Pennsylvania statute, PHC4 has two primary responsibilities:
• To collect, analyze, and make public data about the cost and quality of healthcare in Pennsylvania; and
• To review and make recommendations about proposed or existing mandated health insurance benefits upon request of the legislative or executive branches of the Commonwealth.

Pressure on rural hospitals

As in other states, Pennsylvania’s rural hospitals are under the most pressure. The Commonwealth ran a Rural Health Model, a CMMI demonstration model transitioning hospitals from a fee-for-service model to a global budget payment. It ran from 2019 to 2024. Payment for the global budget came from multiple payers, including private and public insurers. Instead of hospitals getting paid when someone is admitted to the hospital, they received a predictable amount of money at a specified time to provide services in the community. The goal was that through this change in payment model, the hospitals would be able to transform care locally to better meet the health needs of the community. This included opportunities to assess items that may traditionally fall outside of the role of the hospital, such as transportation and broadband Internet access.

The Pennsylvania Rural Health Model was the first CMMI demonstration specifically focused on rural health with a global budget framework. “I believe it's been wildly successful, maybe not through the lens of how our federal partners view success, but as it relates to keeping our hospitals open through the pandemic,” said Janice Walters, M.S.H.A., executive director of the Rural Health Care Redesign Center in Harrisburg, Pa., which led the model. 

Speaking during a Value-Based Payment Summit in February 2025, Walters said, “It is important to note we launched this program in 2019. At the end of the day, we had 18 hospitals that voluntarily chose to do this, which in and of itself, is a success story that the hospital leaders could see the burning platform for change, and raise their hand to test something new, because they knew the fee-for-service paradigm is not going to be sustainable for them. All of our hospitals stayed open during the pandemic. All of them chose to stay in the program through the duration. So that's a testament to what that budget has been able to produce for them.”