Hospital and health system margins have stabilized for the moment, but a variety of factors could change that in coming months.
Data from Strata Decision Technology, which gathers information monthly from more than 1,600 hospitals, found health system operating margins were around 1% for the fifth consecutive month in May while hospital margins grew by less than 1%. Hospitals in the West and Midwest reported slight margin declines while hospitals in the South reported 3.6 percentage points gained in average margins; hospitals in the Northeast reported 1.3 percentage point gains.
Hospital size matters as well. Hospitals with 300-499 beds reported average margin increase of 2.6 percentage points while larger hospitals of 500 beds or more reported a 2.6 percentage point average margin decrease in May. The average margin for hospitals with less than 25 beds dropped 3.3 percentage points.
Gross hospital revenue grew consistently as well, but gains were offset by increased expenses. Overall expenses were up nationwide year over year, driven by higher drug costs. Average total drug expenses increased 8.7% over the last year. Month over month, drug expenses jumped 0.7% while other non-labor expenses decreased slightly.
By region, drug expenses year over year increased:
- South: 9.1%
- Northeast: 9%
- Midwest: 7.3%
- West: 5%
Revenue rose year over year, with outpatient revenue up 5.9% and inpatient revenue jumping 4.8%.
