- Declining new visits, sicker patients and prolonged steep expenses contributed to the fourth consecutive month of negative margins for hospital systems in April, according to a report out Tuesday from Kaufman Hall.
- System revenues fell 7% as patient days experienced a 5.7% drop in April compared to March 2022, the report found.
- The new findings reverse trends from March, when hospitals saw a modest rise in hospital patient volumes and temporary expense reliefs.
Hospitals continued to take a beating in April as expenses remained high and patient volumes dropped. Kaufman Hall found that gross operating, inpatient and outpatient hospital revenues each fell by about 7% from March as coronavirus cases began to rise across the country and patient volumes plummeted.
More patients sought care via telemedicine, urgent care and primary care providers than emergency departments. Rising coronavirus cases may have contributed to the declining patient volume as those with COVID-19 infections opted to stay home and those fearing infections avoided hospitals, the report found.
But, as some patients moved away from hospital systems, those remaining in them stayed 3.5% longer compared to April 2021 and discharges decreased 3.3% from March, signaling an increase in sicker patients.
The analysis follows a deluge of hospitals reporting first quarter losses this year, including Cleveland Clinic, which posted a $178 million loss. Kaiser Permanente, Providence, Sutter Health and others also reported losses as supply expenses surged, admissions decreased and the seven-day moving average of new coronavirus cases more than doubled from April 1 to April 30.
Among the hurdles hospitals are facing: an unsustainable "massive surge" in medical expenses, staffing shortages and personnel leaving the field in droves amid record levels of burnout.
Supply chain disruptions and a prolonged labor shortage contributed to steep expenses and a revenue drop in April, according to the report. Expenses remained significantly elevated at 8.3% higher than April 2021, but fell 4.3% from March. Labor expenses rose 11% year-over-year in a high-demand labor market.
Kaufman Hall's year-to-date operating margin index signaled the fourth-straight month of negative annual operating margins, down 3.1% from the previous month.
The red margins "do not bode well" for the remainder of the year, the report said, adding that many systems will experience lower end-of-year margins.
"The first four months of the year have been highly challenging for hospitals and health systems, and do not bode well for the remainder of the year," said Erik Swanson, a senior vice president of data and analytics with Kaufman Hall. "Even if margins cumulatively return to pre-pandemic levels, many will still end up with substantially depressed margins at year’s end."
The report also noted the Federal Reserve's benchmark rate raise, increasing targeted-interest rates, a tight labor market and rising inflation in the U.S.
“Labor shortages, high prices for supplies, and cost increases to treat sicker patients over longer stays are ballooning hospital expenses. With a bleak consensus outlook for the U.S. economy, those factors and their effects could be here for a while,” Swanson said.