Hospital margins up in June, though many struggling with costs

Hospital margins up in June, though many struggling with costs unknown Hospital margins up in June, though many struggling with costsFierceHealthcare

Nationwide hospital margins continued their upward recovery in June, though analysts warn that not all hospitals are seeing their fortunes improve.

Per data from consulting firm Kaufman Hall’s latest monthly report, hospitals’ median year-to-date operating margin index rose to 1.4% while the single-month operating margin index hit 3.8%.

Still, “most hospitals underperformed slightly compared to May” due to persistent high expenses and other economic pressures, the firm said. The overall margin improvement could also have benefited from fiscal year-end accounting adjustments, the group wrote in its report, while underlying data suggest that many facilities are finding their finances far from the mean.

“As margins continue to stabilize on the surface, the gap between high-performing hospitals and those struggling in this new financial environment is widening,” Kaufman Hall said in an accompanying release.

From May to June, hospitals’ net operating revenue per calendar day rose by 2%, and gross operating revenue per day increased by 1%. Inpatient daily revenue was flat while outpatient revenue increased by 2%, another indication that “people are continuing to shift away from inpatient settings,” the firm wrote.

Kaufman Hall also highlighted hospitals’ elevated bad debt and charity (up 3% per calendar day compared to May) as certain states continue Medicaid redeterminations.

Patient volumes “continue to stabilize” in June, according to the report. Month over month, hospitals saw a 1% increase in discharges per calendar day and a 2% increase in adjusted discharges per calendar day. Average length of stay dropped by 2% from May while daily emergency department visits dipped by 1%.

A 2% month-over-month increase in total expense per calendar day outlined hospitals’ continued pressures as well as some of the measures hospitals are taking to keep their doors open.

Non-labor expenses per day rose 4% month over month and 6% from June 2022 and were accompanied by similar increases in supply spending that points to continued inflationary pressures, according to Kaufman Hall.

Daily labor expense was flat from May as the proportion of full-time equivalents per adjusted occupied beds dropped 8%, “which may indicate higher levels of workforce reductions and staff turnover as hospitals begin taking the steps needed to survive,” the firm said in a release.

“This ‘new normal’ is an incredibly challenging environment for hospitals,” Erik Swanson, senior vice president of data and analytics with Kaufman Hall, said in a release. “It’s time for hospital and health system leaders to begin developing and implementing a strategy for long-term sustainability, including expanding their outpatient footprint and re-evaluating where finite resources are being utilized.”

Some of those potential strategies could include stronger relationships with physician groups that could funnel patients to hospitals, new pathways for post-acute transitions and a stronger outpatient presence, the firm wrote in the report.

Kaufman Hall’s monthly reports incorporate information from more than 1,300 U.S. hospitals, the data from which are collected by Syntellis Performance Solutions.