Many health systems are seeing their finances improve, but rising costs and uncertainty at the federal level are casting a shadow over post-pandemic progress.
Quarterly and full-year 2024 earnings reports released over the past month have shown many positive operating margins, boosted by growing patient volumes and efficiency efforts. However, challenges such as lagging reimbursement rates, higher prices for supplies and pharmaceuticals and changes handed down by a new administration are top-of-mind for systems.
Related: Why 2025 will be a recovery year for providers' finances
Here’s a look at how health systems performed, according to their latest earnings reports.
Systems split on cash reserves
Results were mixed for cash reserves at the health systems. As part of reserves, systems calculate days cash on hand, which measures how long a system can cover its expenses with the available cash. Cash on hand is one metric used to determine an operation’s financial stability.
Rochester, Minnesota-based Mayo Clinic reported 362 days cash on hand in 2024, up from 358 days in 2023. Sanford Health, which is based in Sioux Falls, South Dakota, reported 154.3 days cash on hand, compared with 146.3 days in the prior year.
Despite progress at some systems, others see rising expenses outpacing growth in cash reserves.
Corewell Health reported 200.2 days cash on hand in 2024, down from 205.1 days in 2023. The Grand Rapids, Michigan-based system attributed the decrease to an uptick in average daily expenses.
Renton, Washington-based Providence reported 99 days cash on hand in 2024, down from 107 days in 2023.
Payer denials, rising costs are causing trouble
Costs for supplies and pharmaceuticals are rising, largely due to inflation and the need for more resources to accommodate higher patient volumes. Demand for labor continues to drive up salaries and wages, as well.
Operating expenses at Mayo Clinic grew 9.7% to $18.5 billion in 2024, while expenses at AdventHealth grew 11% to $17.5 billion. Livonia, Michigan-based Trinity Health reported a 6.8% year-over-year jump in operating expenses to $12.5 billion in the six-month period ended Dec. 31.
Meanwhile, health system executives say payer denials are increasing, adding to the pressure systems are already facing.
“We need to change our relationship with payers, as the delta between cost inflation and revenue is unsustainable. We are making good progress, but this has a long tail in terms of when we’ll see the impact of the progress that we are making,” CommonSpirit Chief Financial Officer Dan Morissette said on the system's February earnings call.
Providence said it is using technology, operational tools and legal tactics to lower its accounts receivable balance, which rose by $468 million in 2024 because of payer denials and delays.
Stakes are high for supplemental payments
Health systems have been increasingly reliant on supplemental payment programs to fill in the financial gaps associated with caring for Medicaid patients. Republican lawmakers are pushing for massive cuts to the program.
Dallas-based Tenet Healthcare generated about $1.16 billion from supplemental payments in 2024, and its 2025 guidance assumes a similar amount this year, CFO Sun Park said on the company's fourth-quarter earnings call.
Chicago-based CommonSpirit benefits from supplemental payments in several markets, including California’s provider fee program. The program contributes about $600 million in net income per year for the system. Programs in Kentucky, Texas, Arizona and Nevada contribute another $300 million, Benjie Loanzon, senior vice president of finance and corporate controller, said on CommonSpirit’s earnings call.
Some executives are hoping the historically bipartisan appeal of supplemental payment programs will work in providers' favor.
“The folks in Congress are hearing from the governors’ offices in many of these states,” Universal Health Services CEO Marc Miller said on the company’s fourth-quarter earnings call. “It’s not just the Democratic states, but it’s many of the large Republican-led states as well. That tends to suggest that the pushback is significant.”
Net patient revenue is still growing
Net patient revenue climbed for most health systems in 2024, largely driven by volume growth in admissions, outpatient care, surgeries and emergency department visits.
Net patient revenue is revenue earned from providing healthcare services after contractual discounts. It makes up most of a system’s total operating revenue and has a big impact on the bottom line.
Mayo Clinic reported a 9.8% increase in net patient revenue to $16.6 billion in 2024, while Altamonte Springs, Florida-based AdventHealth reported a 15.9% jump to $18.5 billion.
Cleveland Clinic in Ohio said its net patient revenue grew by more than $1 billion in the last year.
