Hospital Financial Distress & Rural Access (2024)
39.3% of Medicare-participating hospitals are financially distressed. National average operating margin: −13.84%. Derived from CMS HCRIS cost reports — the same data Definitive Healthcare charges $30K/yr for, published free.
Contents · 7 sections
Executive Summary
- 6,019 Medicare-participating hospitals analyzed from CMS HCRIS form 2552-10 cost report filings (fiscal year 2024 issuance).
- 2,368 hospitals (39.3%) meet the MedPAC/Moody's financial distress threshold: operating margin below −5%.
- National average operating margin across all hospitals: −13.84% — indicating the median U.S. hospital loses money on patient care.
- Financial distress is a leading indicator of service cuts, staff reductions, and rural hospital closure risk.
- CMS HCRIS data is public domain (17 U.S.C. § 105); Definitive Healthcare's Hospital Performance Manager charges ~$30K/yr for the same underlying source.
At a glance — for journalists, researchers, and AI agents
What this dataset covers
- 39.3% of Medicare-participating hospitals are financially distressed. National average operating margin: −13.84%. Derived from CMS HCRIS cost reports — the same data Definitive Healthcare charges $30K/yr for, published free.
- Dataset: 6,019 records analyzed.
What this dataset does NOT cover
- Fonteum analysis is not a quality measurement of any individual provider.
- Counts and rankings describe the Fonteum-indexed or source-published dataset, not the entire U.S. market.
Sources
- Fonteum indexed dataset
Snapshot date: 2026
Dataset scope · Snapshot May 25, 2026
Includes: the healthcare-provider records this study covers, each tracing to a dated public-record source named in the citation footer. Does not include: providers outside the source named for this study, or records not present in that source at the snapshot date. Counts describe this Fonteum healthcare-provider dataset — not a representative census of the U.S. healthcare workforce.
Key findings
Overview
This study tracks hospital financial distress across 6,019 Medicare-participating facilities using CMS HCRIS form 2552-10 cost report data (2024 issuance).
What is financial distress? A hospital with operating margin below −5% is classified as financially distressed, following the threshold used by Moody's Investors Service, Fitch Ratings, and the Medicare Payment Advisory Commission (MedPAC). At this level, a hospital loses more than five cents on every dollar of patient care revenue before accounting for investment income or transfers.
Why it matters: Hospital financial health is a leading indicator of service availability, staffing levels, and rural access. Academic literature (Bai & Anderson, JAMA 2016; Kaufman Hall Annual Report 2024) consistently links financial distress to service line cuts, emergency department closures, and eventual facility closure — disproportionately affecting rural communities.
What this is not: A quality rating. Operating margin measures financial sustainability, not care quality. A hospital can have poor margins and excellent outcomes, or strong margins and poor care. See the methodology for limitations.
Key findings
National picture (2024 HCRIS issuance):
- 6,019 hospitals with cost report data
- 2,368 hospitals (39.3%) operating below the −5% distress threshold
- National average operating margin: −13.84%
The −13.84% national average reflects the structural tension in hospital finance: operating margins are often negative while total margins (which include investment income, philanthropy, and government transfers) may be positive. Hospitals increasingly rely on non-operating income to survive.
Rural access risk: Hospitals in rural and underserved areas face compounded pressure — lower patient volumes, higher per-unit costs, greater reliance on Medicaid reimbursement, and limited access to capital markets. Financial distress in these settings typically precedes service cuts by 12–24 months and closure by 3–5 years (North Carolina Rural Health Research Program, 2023).
Per-state breakdown: Available at the /api/research/hospital-distress-rural endpoint. State-level data populates after the operator runs the HCRIS ingest pipeline.
Data source
CMS HCRIS form 2552-10 — the annual cost report filed by all Medicare-participating hospitals. Public domain under 17 U.S.C. § 105.
Key fields used:
- Net Patient Revenue
- Total Operating Expense
- Certified Bed Count
- Fiscal Year End Date
- CMS Certification Number (CCN)
Distress threshold: operating_margin_pct < −5.0% (Moody's/Fitch/MedPAC standard). Methodology version: hospital-distress-rural/v1.
Definitive Healthcare displacement: Definitive Healthcare's Hospital Performance Manager (~$30K/yr) uses the same underlying HCRIS source. This study publishes the same data free, with cryptographic provenance via Ed25519 snapshot co-signatures.
Limitations
- Operating margin is computed from reported figures; HCRIS data has a 12–18 month reporting lag relative to the hospital's fiscal year end.
- Hospital names and state assignments populate when the operator runs the HCRIS ingest pipeline; CCN serves as the stable identifier in the interim.
- Distress threshold (−5%) is a widely-used signal, not a regulatory definition. Different rating agencies use different thresholds (Fitch uses −3%; S&P uses −5% to −7% depending on market position).
- This study covers operating margin only. Hospitals with negative operating margins may remain solvent through investment income, philanthropy, or system cross-subsidies.
- HCRIS covers Medicare-participating hospitals; non-participating facilities are not included.
Limitations
- This study's findings are scoped to the dataset and time window described in the methodology. They do not constitute medical, legal, or financial advice.
- Fonteum does not independently rate, inspect, verify, endorse, or guarantee any provider referenced in this study.
Methodology
Read the full methodology
Operating margin computed from CMS HCRIS form 2552-10 fields: (Net Patient Revenue − Total Operating Expense) / Net Patient Revenue × 100. Stored as percentage points (e.g. −13.84 means −13.84%). Distress flag: operating_margin_pct < −5.0 (Moody's/MedPAC standard). National average: arithmetic mean across all hospitals with non-null operating_margin_pct. Sample: 6,019 hospitals with 2024-issuance cost reports in the Fonteum hospital_margin_index table. Methodology version: hospital-distress-rural/v1.
Operating margin computed from CMS HCRIS form 2552-10 fields: (Net Patient Revenue − Total Operating Expense) / Net Patient Revenue × 100. Stored as percentage points (e.g. −13.84 means −13.84%). Distress flag: operating_margin_pct < −5.0 (Moody's/MedPAC standard). National average: arithmetic mean across all hospitals with non-null operating_margin_pct. Sample: 6,019 hospitals with 2024-issuance cost reports in the Fonteum hospital_margin_index table. Methodology version: hospital-distress-rural/v1.