Change attack, disruptors will test hospital finances: Kaufman Hall

National data on hospital financials has so far reflected a strong start to the year, but challenges are likely ahead in wake of the massive Change Healthcare cyberattack and amid increasing competition from disruptors, according to Kaufman Hall's latest "National Hospital Flash Report." 

The March report, which is based on data from more than 1,300 hospitals, found the median hospital margin in February was nearly 4%, though analysts say the data does not capture the full effect of the Change outage, which began Feb. 21. 

"Robust hospital margins in February demonstrate continued recovery from the pandemic years, but challenges are on the horizon," Erik Swanson, senior vice president at Kaufman Hall, said in a March 27 statement. "The aftermath of the Change Healthcare cyberattack and continued competition from industry disruptors may test financial performance in coming months, as disruptors capture more profitable, lower-acuity and lower-capital-intense services from hospitals."

Two other key takeaways from the March report: 

  • Gross revenue is rising faster than net revenue. This is a reflection of payer mix changes as well as an increase in hospitals' bad debt and charity care over the past few years. 
  • The outpatient setting is driving revenue growth. Meanwhile, hospitals continue to see inpatient revenue decline. 

Earlier in March, a survey of nearly 1,000 hospitals found 94% of hospitals are experiencing financial fallout from the attack, with more than half reporting the financial effects are "significant or serious." On March 22, Change Healthcare started to restore its biggest clearinghouse platforms and had started processing $14 billion in claims. 

A full timeline on the latest updates regarding the Change attack, including regulatory policies to advance payments, can be found here

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