Hospitals continue to struggle

The financial outlook for hospitals and health systems continues to be bleak as rising expenses and lower margins took their tool in May, even though revenue and patient volumes improved, according to National Hospital Flash Report from Kaufman Hall.

The group’s analysts say that the economic outlook for the year is murky because margins are not expected to improve to pre-pandemic levels this year.

“While we are seeing hospitals revenues inch up, it simply is not enough to mitigate the skyrocketing costs of material and labor expenses, resulting in negative operating margins for the nation’s hospitals and health systems,” said Erik Swanson, a senior vice president of Data and Analytics with Kaufman Hall, in a statement. “Hospitals are seeing labor costs increase at every level as they compete with other hospitals and local employers to retain and attract non-clinical staff with higher wages and better benefits.”

Here are some key findings from the report:

Median Operating Margin Up from April but Down Compared to 2021

The median Kaufman Hall year-to-date operating margin index was -0.33%, for a fifth straight month of cumulative negative operating margins. The median change in operating margin in May was up 18.9% compared to April, but down 45.6% from May 2021.

Increased Revenue not Enough to Counterbalance Climbing Expenses

Volume increases led to slightly improved revenue performance in May. Gross operating revenue was up 3.4% from April and 7.6% from May 2021. Outpatient revenue rose 2.2% from April and 9.4% from May 2021. Similarly, inpatient revenue climbed 3.5% from April and 2.6% from May 2021.

According to Kaufman Hall experts, hospital and health system expenses offset any optimism related to increased revenues. Total expenses increased 1.1% from April and 10.7% from May 2021. Hospitals and health systems continue to deal with the effects of inflation and a hyper-competitive labor market that is increasing wages from the registration desk to the cafeteria to the operating room.

Return of Warm Weather Brings Increased Patient Volumes

Patient volumes rose in May, with length of stay up 2.3% from April and 5.5% compared to May 2021, while patient days increased by 4.8% over April figures and were down slightly (0.5%) compared to May 2021. Adjusted patient days grew 3.5% from April to May and 4% from May 2021. Emergency department visits increased 9.5% from April to May and 4.5% from May 2021.

The report is based on data from more than 900 hospitals.