- Hospital margins have started to stabilize after falling into the negatives throughout last year, with thin margins “the new normal,” according to Kaufman Hall’s monthly flash report.
- The median year-to-date operating margin index for hospitals was -1.1% in February, compared to -0.8% in January.
- February was the eighth month where the variance in monthly margins decreased relative to the same period in the previous three years.
Hospitals saw massive variations in financial margins throughout the COVID-19 pandemic, though three years later they are finally steadying.
“After years of erratic fluctuations, over the last several months we are beginning to see trends emerge in the factors that affect hospital finances like labor costs, goods and services expenses, and patient care preferences,” Erik Swanson, senior vice president of data and analytics with healthcare management consulting firm Kaufman Hall, said in a release.
Last year hospitals faced persistent negative margins, with heightened labor costs a key factor.
Expenses were still high in February, though rising prices for goods and services were more to blame than costly labor, according to the report.
Amid inflation, non-labor expenses rose 6% year over year in February, while labor expenses remained steady, likely a result of less contract labor use, the report said.
The pandemic has also driven a shift toward non-hospital based care, as ambulatory surgery centers and outpatient operating room minutes rose last month, and outpatient revenue was up 14% year over year in February.
Discharges, patient days and emergency department visits were down slightly, due to the shorter month.
“Hospital leaders face an existential crisis as the new reality of financial performance begins to set in,” Swanson said. “2023 may turn out to be the year hospitals redefine their goals, mission, and idea of success in response to expense and revenue challenges that appear to be here for the long haul.”