Hospital Operations, Defined

hospital operations

Key Takeaways

  • In response to record financial losses from the COVID-19 pandemic, hospitals are in dire need to increase revenue and cut spending. Hospital Operations serve to fill the need to improve hospital inefficiencies.
  • Though the Hospital Operations subsector of Hospital Analytics raised the most funds, Patient-to-provider communication could reduce the most inefficiency. This disparity highlights a misunderstanding of the hospital landscape by investors and companies.
  • Industry experts highlight staffing shortages as the biggest pain point in hospital operations today. Revenue cycle management and cybersecurity are predicted to gain investment traction.

The United States spent $4.3 trillion on healthcare in 2021. Of that $4.3 trillion, spending on hospital care accounted for approximately $1.3 trillion, or 31% of total healthcare spending. The hospital is a hub of healthcare activity with tremendous clinical and non-clinical overhead costs, including staffing, operating room fees, inpatient and outpatient care, and more.

Though hospitals differ in size and patient throughput due to geography and level of care certification, they all face similar challenges related to limited resources and environmental constraints. At any given moment, a hospital must be able to accommodate an array of patient health conditions and community illnesses with clinical and non-clinical services. These services include but are not limited to, doctors, nurses, allied healthcare professionals, registration teams, finance specialists, cafeteria workers, and environmental health services.

This responsibility places tremendous financial, operational, and physical stress on a facility. The COVID-19 pandemic stretched the rubber band holding the hospital together to a near-breaking point. Patient influx escalated to numbers previously unseen, and services in place could not appropriately care for everyone. The downstream effects were delayed patient care, postponed elective surgeries resulting in significant hospital debt, and overwhelmed employees.

Increasing hospital efficiency is imperative to reduce hospital costs, retain employees, and, most importantly, provide appropriate patient care. Technology offers the opportunity to identify inefficiencies within hospital operations, streamline and automate administrative work previously done by humans, and predict upcoming changes to aid in planning and smooth over unexpected hurdles.

Hospital Operations, Defined

To understand hospital operations and the technologies used to improve inefficiencies, we must first review the definition of HealthTech.

The Langar definition of a HealthTech are companies that use technology to solve pain points in healthcare that affect patients, providers, hospitals, and payors, plus, +51% of their revenues must be derived from HealthTech products and/or services.

Taking it one step further, Langar Holdings defines hospital operations as:

“Companies that improve the efficiency of hospital workflows that are required to provide care.”

Langar’s private Hospital Operations Universe meets three key criteria:

  1. Their primary headquarters are in the United States
  2. They have raised >$5M since 2021
  3. Their deal size since 2019 is >$2M

Hospital Operations Taxonomy

Hospital Operations can be addressed in a multitude of ways, all with the bottom line of making the hospital more efficient. We further breakdown hospital operations into 11 subsectors, as described in Table 1.

Table 1: Hospital Operations subsectors with definitions and number of companies identified

Financial Analysis

Between January 2021 and June 2023, Langar’s analytics team analyzed private Hospital Operations companies. Publicly traded companies like Epic Systems and Cerner Healthcare were not included in this analysis.

Overall, private hospital operations companies raised $8.3 billion during the analyzed period; however, this underestimates the value of Hospital Operations as a whole. For instance, the worldwide EHR industry alone is estimated to be worth $38.4 billion by 2026.

Hospital analytics raised the most at $1.9 billion between 30 companies, followed by Revenue cycle management (RCM) and Practice management at $1.5 billion between 51 companies and $1.1 billion between 45 companies, respectively. (Figure 1)

Figure 1: Total funds raised within Hospital Operations by subsector (Jan 2021 – Jun 2023)

Figure 2 illustrates dollars raised for each hospital operations subsector starting in Jan 2021 with projections to the end of 2023. Fundraising was strong for Hospital Operations in 2021, with steady declines in 2022 and 2023. This reflects the market volatility witnessed across all health tech sectors.

Hospital analytics and RCM are projected to raise the most, with the highest number of deals by the end of 2023. This is expected considering health systems experienced catastrophic financial losses during the pandemic. Between March 1, 2020, and June 30, 2020, hospitals and health systems across the country lost an estimated $202.6 billion. Hospitals now find themselves looking for opportunities to cut inefficiencies and collect revenue with the help of HealthTech.

Figure 2: USD raised and number of deals by Hospital Operations subsectors (Jan 2021 – Jun 2023)

Staffing contributed more to overall fundraising in 2022 in response to the mass exodus of healthcare workers. Many companies that fell under the Staffing subsector included job boards for locums and travel nurses.

Inefficiencies & Cost Savings

Langar’s National Healthcare Expenditure (NHE) analysis identified potential wasteful expenditures saved in each hospital operations subsector by implementing a health technology solution. We used this data to approximate how much a hospital can save by matching a current hospital task with a pain point a Hospital Operations subsector can address with technology (Figure 3).

Some issues can be solved by solutions in multiple Hospital Operations subsectors. For instance, tasks related to admitting patients to the hospital can be addressed with technology solutions in EHR, Practice management, Patient registration/scheduling, Provider-to-provider communication, Staffing, and Supply Chain Management. If a subsector could potentially address a point of inefficiency in hospital operations, it was counted without regard to other subsectors that could also address that inefficiency. This leads to inflation of dollars of expenditures saved, but trends can identify which subsectors address the greatest number of inefficiencies.

Patient-to-provider communication had the highest potential to reduce wasteful expenditures at $456 billion. This is not surprising, as improved communication between the patient and provider could lead to fewer unnecessary visits or quicker necessary medical interventions, both of which would decrease healthcare costs. Improved communication also aids in gathering patient data, which is often a manual process that retains some inaccuracy. Remote patient monitoring or automated patient registration decreases manpower and lost data, which leads to inefficiencies.

The second highest wasteful expenditure category was RCM at $250 billion saved, and the third highest was EHR at $248 billion.

Figure 3: Wasteful expenditures by NHE 2022 Analysis

Industry Experts Weigh In

Leaders in hospital operations nationwide were interviewed for perspectives on the technologies available. When asked to identify the current pain points in their respective hospitals, 7 out of 12 interviewees mentioned a labor or staffing shortage. An aging population and burnout exacerbated by the COVID-19 pandemic are two of many reasons why physicians, nurses, and other allied health services are leaving the healthcare field. This has caused incredible stress to an already strained healthcare system as fewer workers can care for patients and recuperate lost revenues from the pandemic.

Many interviewees spoke from the perspective of the operating room and the downstream effects of lack of staffing. While many think of the shortage as doctors and nurses leaving, ancillary services within the hospital were also highlighted by interviewees, including transport services and environmental services:

[discussing wheeling patients in and out of the operating room to the SICU] “We sacrifice the most expensive resource [operating room] because we don’t have enough transport personnel.” – Executive Vice Chairman for Clinical Operations

[regarding operating room utilization] “We have a shortage of Environmental Services and housekeeping. If we can’t get the patient room clean, it causes delays.” –Anesthesiologist, Perioperative Management Physician

Other pain points highlighted are front desk support staff and inefficiencies in the patient check-in system.

“The scheduling and check-in process is the primary portal to how patients perceive your practice as a healthcare provider. Reception is one of the hardest roles to keep filled consistently with good employees.” – HealthTech Product Leader & Clinician

When asked if their respective hospitals were using any technology-based solution to address pain points or aid in operational efficiency, only EHR was endorsed. This is not surprising when considering the costs of adopting new technologies. Hospitals are large systems, which makes change difficult to implement. It took significant time for the EHR to reach widespread utilization, and even then, usage is inconsistent across different hospitals.

Another aspect to consider is the cost of paying for an additional technology solution when hospitals currently have little wiggle room for additional spending.

An Investing Mismatch

There is a disparity between what investors and companies spend their resources on and what pain points must be addressed. Hospital Analytics raised the most money of any Hospital Operations subsector despite Patient-to-provider communication demonstrating a greater impact on improving inefficiencies. A few hypotheses to this imbalance also reflect the difficulty in funding Hospital Operations and the HealthTech industry:

  • Generalist investors are unclear on the hospital landscape, and for many venture capitalists, their diverse array of holdings often drives their understanding of and decision-making for a certain industry. In other words, investors can only understand an industry or company by a few bottom-line metrics. Even a healthcare-specific investor may not truly understand hospital operations. Because of this superficial comprehension, investors gravitate towards what they are comfortable with or what expedites ROI.
  • Healthcare is an immense industry that innovates at a glacial pace. For some subsectors within Hospital Operations, it is harder to innovate and create sustainable business models. For instance, innovation in this area may take over a decade to gain traction, which is too long for a VC fund to return capital. A lack of successful exits and/or IPOs in Hospital Operations also does not attract investor capital, as it is harder for them to generate an ROI in a timely manner, if at all.

This research suggests that HealthTech companies and investors should focus on making communication clearer and more efficient between patients and providers. This will deliver more value to the patient-provider relationship, reducing inefficiencies and delivering more ROI to all stakeholders.

On a wider scale, investors and entrepreneurs interested in Hospital Operations should truly understand the intricacies of the hospital ecosystem and the pain points that need to be addressed rather than gravitating to what is comfortable or effective in other industries.

Future Predictions

It is possible to make predictions about Hospital Operations and individual subsectors by looking at past trends and taking insights from hospital operations stakeholders.

Revenue cycle management (RCM) had a significant portion of Hospital Operations fundraising in 2021, and it does not appear to slow down. RCM will continue to grow because, in our complex insurance system, they help bridge billing and payment, ultimately expanding a hospital’s top-line revenue. This is paramount as hospitals find themselves in significant debt.

Patient-to-provider communication provides the greatest opportunity to reduce the number of dollars in wasteful expenditures. Artificial Intelligence (AI) and Large Language models’ (LLM) involvement as a middleman in communication or clinical decision support provides immediate attention to patient needs without halting the provider’s day. AI is quickly being adopted into radiology, and its ability to provide lifestyle counseling is an example of reducing provider burden. While LLM may not replace human interaction anytime soon, its potential to streamline the administrative paperwork and processes that plague Hospital Operations and the day-to-day of providers is invaluable.

Analyses failed to accurately depict the rare but adverse consequences to Hospital Operations if something should fail. Cybersecurity has been, and will continue to be, critical for hospital and data security. 112 million individuals were implicated in a healthcare data breach in 2023. In addition to the security of sensitive data, hospitals may receive ransoms and/or encounter operational disruptions from a cyberattack, which impact patient care. The increase in frequency and severity of cyberattacks has caught the attention of Congress. 55% of U.S. hospitals and healthcare systems providers cited cybersecurity as their highest digital and IT investment priority in 2024. It should be expected that investment in cybersecurity will continue to rise quickly and remain an indefinite priority as cybercriminals become more sophisticated and hospital technologies struggle to maintain defenses.

Staffing shortages are the largest pain point in hospital operations today, and it will take many years to normalize, if ever. The complex ecosystem of a hospital requires several personnel in all roles to help it run smoothly. Emphasis will continue to be on filling staff roles that cannot be replaced by technology and on solutions such as artificial intelligence to fill gaps in staffing within the hospital.


Hospitals are integral components of our healthcare system. The total addressable market for hospitals grows older and sicker while employees leave in droves.  Because of these factors, increasing hospital efficiency is a priority now more than ever. From 2019 to 2023, U.S. hospitals and healthcare systems increased their digital and IT budgets by an average of 18.3%, a significant jump from the normal increase of 1-3% per year. In addition, 65% expressed a goal of increased operational efficiencies.

As we move forward in a post-pandemic era, hospitals must recover their losses, improve their workflows, and work to retain quality staff to continue to provide excellent patient care to their communities.

Lauren Tien, MPH

Lauren is currently pursuing her M.D. at The Robert Larner, M.D. College of Medicine at The University of Vermont. Before medical school, Lauren was a product manager at a health technology startup and received her Master of Public Health in Epidemiology from The University of Texas Health Science Center.

Scroll to Top