Hospital revenue outpacing expense growth amid strategy pivots

Hospitals are emerging from a financially challenging year with margins holding steady and year over year revenue growth outpacing expense growth in the month of October, according to KaufmanHall's November "National Hospital Flash Report."

Net operating revenue per calendar day was up 9% year over year and 2% month over month in October. Comparatively, total expenses per calendar day grew just 5% year over year and were flat month over month.

Outpatient revenue continues to rocket, jumping 12% year over year and 3% month over month. Health system executives have been developing strategies to move further services into outpatient settings, virtual care and home-based care over the last year to keep up with national trends for value-based care and cut unnecessary hospital expenses.

Inpatient revenue per calendar day was up 7% year over year in October and 2% month over month. Compared to 2020, inpatient revenue is up 15% while outpatient revenue soared 43%.

On the expense side, supply costs continued to challenge hospitals. The supply expenses per calendar day jumped 11% year over year and 4% month over month in October. With many hospitals focused on ways to cut labor costs through employee retention efforts and reducing reliance on contract labor, hospitals saw just 3% year over year increase in labor expenses per calendar day. Month over month labor expenses were flat.

The report also noted labor expenses per adjusted discharge dropped 5% year over year, and are now down 6% compared to 2020.

Hospitals have been able to move patients through more quickly than last year, with a 5% increase in discharges per calendar day and 9% decrease in observation patient days as a percentage of patient days. The total average length of stay was also down 7% year over year in October.

Regionally, the revenue and expenses varied:

West
Net operating revenue per calendar day YoY: 10%
Expenses per calendar day YoY: 7%

Midwest
Net operating revenue per calendar day YoY: 5%
Expenses per calendar day YoY: 2%

South
Net operating revenue per calendar day YoY: 13%
Expenses per calendar day YoY: 7%

Northeast / Mid-Atlantic
Net operating revenue per calendar day YoY: 6%
Expenses per calendar day YoY: 3%

Great Plains
Net operating revenue per calendar day YoY: 10%
Expenses per calendar day YoY: 6%

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