Hospitals see another negative month in October

As the end of the year approaches, hospitals are still struggling with negative margins as a result of expenses, staff shortages, and fewer patient discharges driving poor performance, according to the latest National Hospital Flash Report from Kaufman Hall.

The year-to-date operating margin index for hospitals was -0.5% through October, dropping 2% from September, and down 13% from October 2021. This marks the tenth straight month of negative margins.

Expenses continue to be a problem, with total expenses increasing slightly in October from already elevated levels in September, outpacing revenue. Total expenses increased 1% from the previous month, while total labor expenses increased 3%.

“Record-high expenses across the economy have not eased up, leaving hospitals in a precarious financial position as we look to the end of the year,” said Erik Swanson, senior vice president of data and analytics with Kaufman Hall, in a statement. “With the labor market in the healthcare sector still highly competitive, hospitals are feeling the financial pressure of needing to attract and retain workers with significant increases in salaries.”

Hospitals saw modest increases in emergency department (ED) visits (3%) and operating room minutes (2%) over September figures, contributing to a 2% increase in gross operating revenue from the previous month. The increase in ED traffic could, however, have a straining effect on the nation’s ED workforce as patients are unable to be admitted to inpatient settings due to staff shortages. In many instances, this has led to patients being boarded in the ED.

Staff shortages across hospitals and post-acute settings have also resulted in fewer patient discharges and longer lengths of stay. Adjusted discharges were down 1% from September 2022 and average length of stay increased 3%. The longer stays, however, have not resulted in additional revenue for hospitals.

“Every aspect of patient care—from being admitted, to treatment, to discharge—is affected by the labor shortage and as we head into the virus season and potential new waves of COVID-19 the pressures on hospitals and their staff could mount,” said Swanson. “The October data reinforce what we have known for several months, 2022 has been and will continue to be a very difficult financial year for the nation’s hospitals.”

The report draws on data from more than 900 hospitals. Data from the report come from Syntellis Performance Solutions.