- Hospitals’ fared better financially during January this year than in 2022 when the omicron variant of COVID-19 hit, though operating margins are still lagging compared those seen in 2021 and 2020, according to Kaufman Hall’s monthly hospital flash report out Tuesday.
- While volumes, emergency department visits, discharges and total revenues fell in January compared to the prior month, labor expenses rose, according to the report.
- Persistent expense challenges amid inflation and staffing shortages remain, with total expenses rising 1% and total labor expenses rising 3% month over month, according to the report. Total net operating revenue fell by 3% month over month.
While hospitals had their worst financial year since the pandemic began in 2022, they are entering 2023 on more stable footing, according to Kaufman Hall.
Some impacts of the pandemic continue lingering, though, including higher labor expenses, lower patient volumes and a shift toward non-hospital-based care — all of which are expected to continue in the aftermath of the public health crisis and suggest a shift toward a new normal for operators, the report said.
Hospitals faced persistent negative margins last year, and margins again fell slightly from -0.7% December to -1% in January, according to the report.
Alongside labor costs, drug expenses have also risen throughout the pandemic, increasing 12% compared to 2020 year to date, according to the report.
The rise coupled with lower volumes and longer stays suggests hospitals are seeing more higher-acuity patients since the start of the pandemic, the report said.
“The trends in increased drug spending and decreased patient volume are indicators of a new landscape in how patients are utilizing hospital services in their care experience,” Erik Swanson, senior vice president of data and analytics with Kaufman Hall, said in a release.
“Hospitals continue to see outpatient sites driving increased revenue. Hospitals must continue to explore how to treat lower-acuity patients in novel settings as patient volumes shift to outpatient locations,” Swanson said.
Discharges and emergency department visits declined month over month while operating room minutes stayed flat in January. Adjusted patient days and average length of stay rose during the month.
Ultimately, the median year-to-date operating margin index for hospitals was -1% in January, compared to -3.7% during the same month last year. In 2021, it was -0.1%, and in 2020 it was 3.1%.