- Hospitals' outpatient volumes and operating room times both declined in July compared to June, while costly inpatient stays lengthened. The combination is contributing to some of the worst operating margins since the start of the COVID-19 pandemic, Kaufman Hall said in a report published Monday.
- Pent-up demand for medical care that was postponed during the winter surge in COVID-19 omicron cases has bottomed out, the advisory firm said. At the same time, Coronavirus Aid, Relief, and Economic Security Act and stimulus funding that helped offset losses in previous pandemic years has dried up.
- Kaufman Hall said its median hospital operating margin index of negative 0.98% for the year to date reflects seven straight months of losses. “July was a disappointing month for hospitals and put 2022 on pace to be the worst financial year hospitals have experienced in a long time,” said Erik Swanson, senior vice president of data and analytics.
Kaufman Hall's newest monthly update on national hospital performance is the latest grim assessment of the sector's withering finances.
A string of healthcare systems have reported weak results in the first half of the year, exacerbated by labor shortages and rising supply costs that are driving up expenses. Against this backdrop, Fitch Ratings earlier this month revised its outlook for the U.S. nonprofit hospital sector to “deteriorating.”
The American Hospital Association, in its own report, said hospitals are treating sicker patients who delayed care earlier in the pandemic, and the higher acuity rates are placing a greater burden on staff and creating "unsustainable" financial challenges.
Kaufman Hall said its findings support the conclusion that sicker patients are seeking treatment at hospitals. The average length of stay increased 2% in July from June and 3.4% from July 2021. Patient days rose 2.8% from the prior month, and emergency department visits increased 2.6%.
However, operating room minutes dropped 10.3% in July from June. The drop in outpatient and surgical revenues is part of a larger shift in the way patients are accessing care, more often choosing ambulatory centers over hospital settings as the place to have procedures, Kaufman Hall said. Outpatient revenue dropped 4.8% from June.
Labor expenses, which have remained well above pre-pandemic levels throughout 2022, jumped in July from June, the report found. Labor expense per adjusted discharge rose 3.5% from June and has climbed 14% year to date.
Hospitals’ total expenses dipped 0.4% from June but were up 7.6% from July 2021. Inflation and labor shortages contributed to total costs increasing 9.6% year to date, the report said.