Hospital margins inch up to 1.1% in August

Hospital margins are moving in the right direction, as the median year-to-date operating margin improved in August to 1.1 percent, according to Kaufman Hall.

August's median of 1.1 percent marked an upswing from the 0.9 percent median margin recorded in July, according to Kaufman Hall's latest "National Hospital Flash Report" — based on data from more than 1,300 hospitals.

Increased revenue offset hospitals' increased supply and drug expenses in August. Decreased reliance on contract labor helped labor expenses decline on a volume-adjusted basis, while average lengths of stay also fell, by 4 percent month over month.

Although hospital margins sit below historical levels, 2023 has brought less variance as positive margins are becoming more frequent. This nonlinear recovery follows hospitals' worst financial year since the COVID-19 pandemic. Erik Swanson, senior vice president of data and analytics with Kaufman Hall, said it is important for hospitals to look ahead in the current moment. 

"This period of relative stabilization is the time for hospitals to re-engage in capital planning efforts," Mr. Swanson said. "Hospitals may be feeling reluctant given the last few years, but those that wait may find themselves falling behind their competitors and missing out on key opportunities."

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