Hospital margins continued to stabilize in March, but remained razor thin as inflation drove up supply and drug costs, according to Kaufman Hall’s national hospital flash report.
Hospitals reported flat median year-to-date operating margins, an improvement from almost a year of negative margins, according to the report.
“While it appears that hospital finances are stabilizing, that doesn’t mean that all is well,” said Erik Swanson, senior vice president of Data and Analytics with Kaufman Hall, in a statement.
Expenses, driven by economic inflation, hampered hospitals and outpaced a 24% month-over-month increase in profitability and a 12% increase in revenue.
Total hospital expenses increased by 8% month-over-month, driven by a 9% increase in labor expenses and a 15% and 14% increase in supply and drug expenses, respectively.
Non-labor expenses have battered hospitals this year as systems recover from pandemic-related challenges and labor costs remain elevated. This week, for-profit hospital operator Community Health Systems reported lower patient acuity and both an increase in labor and non-labor expenses, driving it to a $51 million net loss in the first quarter.
Rising expenses and thin operating margins have left hospitals vulnerable to a potential recession or a new public health emergency, according to the report.
Patient volumes continued to improve in March but gains were restrained by a 4% month-over-month decrease in length of stay, suggesting lower patient acuity exacerbated by continued workforce shortages.