Dive Brief:
- Hospitals continued to operate in the red during September after nine straight months of negative operating margins, according to Kaufman Hall’s newest monthly national hospital flash report.
- Consistent negative margins are leading to what could be “one of the worst financial years for hospitals” in 2022 as systems are hit by depressed revenues, heightened expenses and unfavorable payer mixes, according to the report.
- Hospital expenses decreased slightly, but not enough to balance depressed volumes and revenues, the report found, as sicker patients and labor shortages, particularly in post-acute care settings, drove down a decline in discharges and an increase in stay days.
Dive Insight:
Hospitals have focused on lowering expenses during the third quarter this year as systems look to rein in spiking contract labor costs due to staff shortages caused by persistent healthcare burnout.
Universal Health Services said in late October it would be focused on lowering premium staff pay and filling workforce vacancies as it faced external inflationary expenses combined with heightened labor costs.
Likewise, Franklin, Tennessee-based for-profit operator Community Health Systems posted a $42 million net loss despite lowering its temporary contract labor costs, as falling admissions and lower-acuity patients battered the system’s financials.
Hospital expenses dropped in September compared to August and improved year over year but remained 19% higher year-to-date compared to pre-pandemic levels, according to the report.
The persistent negative margins could force hospitals to make “difficult decisions” regarding patient services, the report said.
“Health systems are starting to get a clear picture of what service lines have a positive effect on their margins and which ones are weighing them down,” Matthew Bates, managing director and physician enterprise service line lead at Kaufman Hall, said in a statement. “Without a positive margin there is no mission.”
Negative margins were driven by an overall 3% decline in admissions from August to September. Emergency department visits and adjusted patient days were also down 3% from August, including a 3% drop in adjusted discharges.
Hospital margins were down 0.1% year-to-date in September, according to the report. Margins spiked during the later months of 2021 as a spike in the COVID-19 delta variant contributed to an increase in hospital admissions.
