Hospitals see uneven financials as margins dip

Hospital margins were down slightly month over month in January, but up to begin the year as compared to 2021 and 2022, according to Kaufman Hall's National Hospital Flash Report, released Feb. 28.

Operating margins in January were 5.1%, down from 5.5% reported in December. Kaufman Hall collects data from more than 1,300 hospitals to report on national averages. Operating margins have fluctuated in the last 12 months, from a -1.2% low in February 2023 to 5.5% highs in June and December.

The report noted net revenue is rising, but not as fast as gross revenue. Net operating revenue per calendar day was up 1% month over month while gross operating revenue per calendar day increased 5%. Year over year, both grew 10% in January.

The faster net operating revenue growth could be attributed to payers negotiating "more aggressively" as well as a focus on value-based care models, according to the report.

Kaufman Hall noted labor expenses improved, and drug and supply expenses are growing. Here is a breakdown of expenses in January:

Total expenses per calendar day
1. Month over month: 3% growth
2. Year over year: 6% growth

Labor expenses per calendar day
3. Month over month: 3% growth
4. Year over year: 4% growth

Supply expenses per calendar day
5. Month over month: 4% growth
6. Year over year: 11% growth

Drugs expense per calendar day
7. Month over month: 6% growth
8. Year over year: 13%

Finally, Kaufman Hall mentioned the highest performing hospitals have adopted effective advanced analytics and artificial intelligence strategies while the lowest performing hospitals did not.

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