Happy Thursday, Hospitalogists.

Today is a quick dive into Advocate Health's 1H 2026, with financials posted in late August. As we await everyone's report through the first half of the year, it's worth a look at one of the biggest nonprofit health systems in the nation covering large swaths of geography in Illinois and North Carolina among other geographical regions.

Advocate is also among the strongest performing health systems from a financial and volume standpoint, so a good litmus test on how one of the best is doing relative to a strong 2025.

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BLAKE'S BREAKDOWN

Advocate Health: By the Numbers

Download the excel data book and powerpoint by clicking on the image

Advocate Health (Atrium+Advocate) continues to enjoy healthy financials and growth driven by favorable demographics, but the top 3 health system saw some slight drops year over year as compared to 2025, in my best assumption, driven by the hospital headwind of the year in ACA subsidy expiration.

So Advocate saw an uptick in its self-pay patients (1% to 4% in 1H 2026) and a downturn in commercial mix (down 5%!!). Coincide this change with expense inflation outstripping revenue growth in supplies and drugs along with purchased services / other, which I can only assume to be specialty drugs growth and professional subsidy fees growth.

As a result, Advocate saw some slight operating margin compression, but its balance sheet was bolstered by strong market returns.

Notable Financial and Operating Items:

1. Consolidated operating income dropped YoY despite 8.6% revenue growth and 3.5% discharge growth.

2. Investment returns are carrying the reported result given operating margin shrinking yet net margin expanding.

3. The 5-point commercial payor mix decline and associated self-pay 3% increase lines up with other hospital commentary.

4. AR growing faster than revenue.

5. Capex down 18.7% while total debt rose 11.1%.

6. CMHA's negative operating cash flow and the labor/purchased-services divergence on its P&L.

Income Statement: Expense growth outpaced revenue growth by roughly 70 bps. Operating margin compressed to 3.8% from 4.4%, while excess margin expanded to 12.1% from 10.1%. Nonoperating income was 71% of the bottom line, up from 59% a year ago, and was 2.5x operating income. Interest expense fell 6.0% while total debt rose 11.1%. I found this expense growth somewhat unexpected given the size of Advocate organizationally and how the cross-market mega merger thesis was largely driven on capability-based scale (supply chain leverage, back office consolidation, rev cycle standardization). Probably just a short-term blip.

Volume: Generally good. Two things stand out. wRVUs grew at more than twice the rate of bedded volume. And patient service revenue per bedded patient rose ~6.5% ($45.4K vs. $42.6K) against a flat case mix index. ED visits were the only volume line to decline. Advocate did note that prior-year discharges, observation cases, LOS, outpatient surgeries, ED visits, and wRVUs were all restated to the current-year methodology, so the comparability of those specific lines depends on the restatement.

On the Payor Mix Side: As a whole, a 5-point commercial decline in twelve months is the single largest shift in the financials, almost undoubtedly the effect of ACA disenrollment, offset by the self-pay/other line tripling from 1% to 4%. Huge swings in payor mix for a health system of this size.

Cash Flow: Excluding trading securities lines, operating cash flow was ~$2,042M vs. ~$1,592M, or +28.3%. Capex fell 18.7% to $948.6M. Financing inflows of $815.5M included $715.3M of new long-term debt issuance and $439.0M of net line-of-credit and CP borrowing. Days cash on hand swelled to 288 days and 356% cash to debt, meaning Advocate is exorbitantly well capitalized.

Notable: All of the consolidated operating income decline sits at CMHA. Its labor line contracted 4.2% while purchased services grew 52.7% (probably some sort of outsourcing or reclassification of some kind). Also, don’t forget Atrium is trying to seal the deal with WakeMed to add another layer to its balance sheet (it has promised $2B in capital to the AMC over the next several years alongside $1B+ deployed in Chicago).

MISCELLANEOUS MADDENINGS

It is time.

Don’t miss my 2026 Texas Longhorns official season preview!

Texas by 40 this weekend.

Thanks for the read! Hook 'em.

— Blake