Labor pressures continue to strain hospital finances: Kaufman Hall

Hospitals across the U.S. continued to feel the financial strain of the nationwide labor shortage and supply chain challenges in November, according to a report released Jan. 4 by healthcare consulting firm Kaufman Hall.

The consulting firm found that labor expenses continued to climb from October to November 2021, despite hospitals seeing lower staffing levels. In particular, labor expense per adjusted discharge rose 2.7 percent month-over-month, while there was a 1 percent decrease in full-time equivalents per occupied bed.

While hospitals across the country saw an increase in labor expenses, hospitals in the West had the biggest increase for the month, rising 28.8 percent compared to November 2020. 

"Widespread labor shortages are driving up already high labor expenses, posing significant operational challenges for our nation's hospitals," said Erik Swanson, a senior vice president of data and analytics with Kaufman Hall. "Hospitals are grappling with higher labor costs despite lower staffing levels, due to intense competition for qualified healthcare workers. In addition, the highly contagious omicron variant could put more pressure on hospitals in months to come."

In addition to labor expenses, total expense per adjusted discharge rose 24.7 percent when compared to November 2019, and non-labor expense per adjusted discharge increased 20.5 percent relative to pre-pandemic levels in November 2019. 

Overall in November, hospital margins and discharges remained down compared to pre-pandemic levels in November 2019. The median operating margin was 2.7 percent in November 2021, not including federal relief funding. With relief funding, the median operating margin was 4.1 percent. Compared to November 2019, the median operating margin is down 22.1 percent, not including relief funding. 

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