Hospitals have worst year in 2022 since the start of the pandemic

Hospitals saw their worst financial year in 2022 since the start of the pandemic, according to a new report from Kaufman Hall. Hospitals faced negative margins for most of the year as they dealt with rapidly increasing labor costs.

There were margin improvements near the end of the year as provider productivity increased thanks to growing patient volumes.

The median year-to-date operating margin index for hospitals was 0.2% in December, the only month in 2022 where hospitals realized positive YTD margins, according to findings in the latest National Hospital Flash Report. Approximately half of U.S. hospitals finished the year with a negative margin as growth in expenses outpaced revenue increases.

According to the latest Physician Flash Report, the median investment/subsidy per provider full-time equivalent fell to $187,801 in the fourth quarter of 2022, down 5% compared to the fourth quarter of 2021.

Patient volumes increased, particularly in outpatient settings, as patients moved away from emergency department visits and towards care delivery in ambulatory and outpatient surgical settings, according to the report.

Meanwhile, Q4 data illustrated a shift in where patients seek care, choosing to access care away from inpatient hospital settings. This shift led to increased provider productivity, significantly increasing revenue, as the net patient revenue per provider FTE rose to $397,493, an 8% increase year-over-year.

“The pandemic fueled a fundamental shift in how patients are choosing to access their routine care,” said Matthew Bates, managing director and Physician Enterprise service line lead with Kaufman Hall, in a statement. “Providers are seeing more patients than ever, particularly in primary care settings, and care is moving away from hospitals. Medical groups should seek to improve individual provider productivity and efficiently integrate advanced practice providers to meet the increase in volume and successfully bend the cost curve.”

Labor costs continue to be a challenge for hospitals and health systems. A competitive labor market and greater reliance on more expensive contract labor to meet staffing demands drove hospital and provider expenses that their bottom lines could not overcome, despite increased patient volumes. Hospital labor expenses increased by 2% from November to December 2022. Total direct expense per provider FTE increased to $592,430 in the fourth quarter of 2022, a 5% increase compared to Q4 2021, according to the report.

The report raws on data from more than 900 hospitals from Syntellis Performance Solutions.