US Hospitals Begin 2023 With A Better Financial Footprint

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According to Kaufman Hall’s monthly hospital flash report, hospitals across the US did better financially in January 2023 than their situation was a year ago when the COVID-19 variant, Omicron, surfaced. That said, the operating margin still happens to be lagging as compared to what was witnessed in 2020 and 2021. Although emergency department visits, volumes, total revenues, and discharges fell this year in January as compared to January of 2022, labour expenses saw an unprecedented rise, as per the report.

Continuous expense issues, along with inflation and staffing shortages, have been witnessed, with total expenses rising 1% and total labour costs increasing by 3% month-on-month. Notably, the total net revenue dipped by 3% monthly.

While 2022 happened to be the worst financial year for US hospitals since the time the pandemic hit, as per the Kaufman Hall report, they are re-entering a more stable footing in 2023.

Although some pandemic impacts continue to linger, such as higher labour costs, the transition towards non-hospital-based care, and lower patient volumes, all of which are going to be part of the public health crisis aftermath, it suggests moving towards a new normal when it comes to operators.

Significantly, the hospitals continued to face prolonged negative margins in 2022, and interestingly, these margins fell marginally from -0.7% in December 2022 to -0.1% in January, as per the report. Besides the labour cost, drug expenses too have surged in the US all across the pandemic, increasing by 12% vis-à-vis 2020, as per the report.

The rise in cost, which is also teamed with lower volumes as well as longer stays, suggests that hospitals are witnessing more high-acuity patients since the time the pandemic began, the report says. According to the senior vice president for data and analytics at Kaufman Hall, Erik Swanson, the pattern when it comes to increases in drug spending as well as decreased patient volumes points to the fact that patients are utilising the services rolled out by hospitals when it comes to their care experience. Swanson added that hospitals continue to witness outpatient sites pushing for increased revenue. Apparently, they must consistently start exploring how to take care of lower-acuity patients in new settings as the patients make a move towards outpatient locations.

It is well to note that discharges as well as emergency department visits dipped month on month, while operating room minutes continued to stay flat in January 2023. Interestingly, adjusted patient days as well as average stay length rose during the month. The median year-to-date operating margin for hospitals hit -1% in January as compared to -3.7% in the same month in 2022. In 2021, it remained at -0.1%, and the year before that, it was 3.1%.