Hospital margins off to rough start in 2022

Hospital and health system operating margins haven't recovered from the omicron surge and additional setbacks may be ahead. 

The median operating margin for hospitals and health systems declined by 11.8 percent month-over-month in February, and margins were down 42.4 percent from February 2020, just before the pandemic started, according to a March 28 report from Kaufman Hall. 

In February, the median operating margin remained negative for the second month in a row. The median operating margin in February was -3.45 percent, a slight improvement from -4.52 percent in January.

The report noted hospitals saw fewer severely ill COVID-19 patients in February, which contributed to shorter hospital stays. Average length of stay was down 5.3 percent month over month in February. 

"Recovery from the Omicron surge likely will continue to be slow in the coming months, and hospitals could face additional setbacks if other variants — such as the BA.2 Omicron subvariant — lead to new surges," Kaufman Hall said. 

National labor shortages coupled with global supply chain issues could cause more hospitals and health systems to report losses for the first quarter of this year.  

Several hospitals and health systems, including Renton Wash.-based Providence and Detroit-based Henry Ford Health, ended 2021 with operating losses. 

Providence, a 52-hospital system, said higher wages, increased agency staffing costs and overtime pushed its labor costs 10 percent higher year over year. Henry Ford said salaries, wages and employee benefit costs climbed 8 percent year over in 2021.

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