- Hospitals notched slightly better operating margins in November, compared to the month before, as expenses eased and outpatient revenue increased, according to a latest analysis from Kaufman Hall.
- The positive monthly showing, however, is tempered by weak profit performance over most of 2022, as hospitals absorbed high labor and other costs that outpaced revenues. While the median operating margin rose 12% in November from October, it still slumped 5% year over year and declined 44% for the year to date compared to 2021, according to the data from more than 900 hospitals.
- “The November data, while mildly improved compared to October, solidifies what has been a difficult year for hospitals amidst labor shortages, supply chain issues, and rising interest rates,” Erik Swanson, Kaufman Hall's senior vice president of data and analytics, said in a release.
Inflation and staffing shortages, particularly in nursing, caused historically high expenses for hospitals and health systems in 2022. The persistent labor crisis also forced facilities to operate below full capacity, pressuring volumes and revenues, Kaufman Hall found in a prior survey.
Labor shortages resulted in facilities struggling to discharge patients, causing longer lengths of stay that added to expenses but did not translate into additional revenue.
In November, however, the situation improved, Kaufman Hall found, with a slowdown in volumes and shorter patient stays contributing to a 1% decline in total expenses, which in turn supported margins. Labor expenses alone fell by 2% in November, possibly due to a shift away from expensive contract labor, the consulting firm said.
Net operating revenue edged up 1% in November, compared to both the prior-month and year-earlier periods, driven by a 10% year-over-year rise in outpatient services revenue. With inpatient revenues flat, Kaufman Hall recommended hospitals develop their outpatient care capabilities to address the industry's ongoing challenges.
Health system leaders are indeed bracing for more turbulence in the year ahead, with 85% of those in a poll by Deloitte anticipating staffing challenges will affect their 2023 strategy and 76% expecting inflation to remain a significant factor affecting the operating environment.
Kaufman Hall’s year-to-date operating margin index, reflecting the national median adjusted for allocations to hospitals from corporate, physician and other entities, was negative 0.2% through November, narrowly improved from the negative 0.3% reported in October, the firm said.