Hospitals likely to end 2022 in the red despite August boost, report says

U.S. hospital margins continue to fluctuate in 2022, making it likely hospitals will end the year in the red, according to strategic consulting company Kaufman Hall.

Fluctuations are due to high expenses and low volume compared to pre-pandemic levels, according to the Oct. 3 National Hospital Flash Report. The median year-to-date operating margin index was down 0.3 percent in August. Margins improved slightly by a median of 4.2 percentage points over July 2022 but remained down by a median of 2.1 percentage points from August 2021, according to the report. 

Key takeaways from the report:

  • Outpatient volume increased in August due to an increase in elective procedures. 
  • As a result, operating room minutes increased 13.6 percent from July 2022 and were up 5.5 percent year-over-year; however, they remain down compared to pre-pandemic levels. 
  • Patient lengths of stay dropped 2.1 percent from July 2022 and 2.7 percent from August 2021.  
  • Patient days rose 0.7 percent from July 2022 to August but were down 7.9 percent compared to August 2021. 
  • Emergency department visits increased 1.1 percent from July 2022 to August. 

Erik Swanson, senior vice president of data and analytics at Kaufman Hall, said August was a better month for hospital patient volumes with elective surgeries and discharges up, combining to improve revenues. 

"Despite the short-term improvements, though, overall hospital performance is still well below pre-pandemic levels. In addition, hospitals need to reckon with new market entrants, like urgent care centers and free-standing surgery centers, that are chipping away at hospital outpatient revenues and overall margins," Mr. Swanson said. 

Volume increases improved hospitals' revenue performance in August, with gross operating revenue up 9.1 percent from July 2022. Meanwhile, outpatient revenue climbed 10.9 percent month over month while inpatient revenue increased 4.9 percent. 

Expenses kept pace with revenue, with total costs increasing 3.3 percent from July 2022 and 6 percent from August 2021. Supplies and medications were significant drivers of the increase, with total labor expenses up 1.3 percent from July, according to Mr. Swanson. 

"Hospitals fared slightly better in August than they did in July, but they still face an extremely difficult path forward. Competition for outpatient care could make the journey longer and bumpier than anticipated," Mr. Swanson said.

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