Virtual Care Adoption Surges as Health Systems Face Financial Losses, Thin Margins, According to New Strata Report

Chicago, IL — June 4, 2026 — Hospitals and health systems are increasingly relying on telehealth, remote patient monitoring, and advanced practice providers (APPs) to expand patient access and meet growing care demands. At the same timeYet, many organizations continue to face financial pressures from unreimbursed virtual care services, rising utility costs, and operating margins that remain near break-even levels, according to data from Strata Decision Technology's latest Strata Performance Trends report.

The national analysis found that telehealth and remote patient monitoring have become deeply embedded in healthcare delivery. Despite sustained growth in utilization, however, healthcare organizations continue to incur significant losses on virtual care encounters across all major payor categories. At the same time, health systems are accelerating investment in artificial intelligence (AI), analytics, and data leadership while operating margins remain thin and non-labor costs continue to rise.

"Healthcare organizations are increasingly turning to technology and new care delivery models to address workforce shortages and improve patient access," said Steve Wasson, Strata's Chief Data & Intelligence Officer. "The challenge is that many of these investments, particularly in virtual care, are occurring at a time when margins remain extremely narrow. The organizations best positioned for long-term success will be those that can balance innovation, access, and financial sustainability."

Virtual care becomes essential as financial challenges persist

Telehealth encounters increased 79% between January 2019 and January 2026, while remote patient monitoring encounters grew nearly 4,000% over the same period. The findings suggest that virtual care has evolved from a pandemic-driven necessity into a permanent component of healthcare delivery.

Despite widespread adoption, hospitals and health systems continue to lose money on virtual care services. Average total cost margins for telehealth encounters remained negative across all payor categories in 2025, including commercial, Medicare, Medicaid, and self-pay patients. The results underscore the ongoing challenge of sustaining virtual care programs while reimbursement models continue to evolve.

The report also found that health systems are making significant investments in AI, analytics, and data leadership. The percentage of organizations with C-suite or vice president-level executives focused on AI, data, or machine learning nearly tripled since 2019, reflecting growing emphasis on governance, digital transformation, and operational efficiency.

Margins remain near break-even as costs continue to rise

Health system operating margins edged lower in April, declining to 0.2% from 0.4% in March following two months of improvement. Although margins recovered from a 12-month low of negative 0.6% in January, financial performance remains fragile, with many organizations operating only slightly above break-even.

Non-labor expenses continued to outpace other cost pressures. Drug expense increased 8.9% year over year in April, contributing to a 9.3% increase in total non-labor expense. Rising utility costs added further pressure, particularly in the Northeast, where hospital utility expenses increased more than 30% in March compared to 2024 levels.

At the same time, patient demand remained generally positive. Inpatient admissions increased 4.8% year over year in April, while outpatient visits rose 3.0%. Revenue growth also remained strong, with outpatient revenue increasing 9.7% year over year. However, hospitals continued to face growing levels of uncompensated care, with bad debt and charity care increasing 13.6% compared to April 2025.

About the Data

This report uses data from Strata’s Comparative Analytics solution and StrataSphere database. Comparative Analytics offers access to near real-time data drawn from more than 149,000 providers from over 15,000 practices and 139 specialty categories, and from 500+ unique departments across more than 2,200 hospitals. StrataSphere is a comprehensive data-sharing platform representing approximately 25% of all provider spend in U.S. healthcare.

About Strata Decision Technology

Strata Decision Technology provides a cloud-based platform for software and service solutions to help organizations better analyze, plan, and perform in support of their missions. More than 2,300 organizations rely on Strata to provide their financial analytics, planning, and performance solutions. Strata has been named the market leader for Business Decision Support for 18 consecutive years. Strata delivers market-leading solutions and world-class service, with an increased focus on accelerating innovation. For more information, please visit www.stratadecision.com.