Hospital margins negative again through October
Hospitals are still facing tough financial conditions heading into the end of 2022, with the latest National Hospital Flash Report revealing negative margins in October.
During the month, hospital operating margins were -0.5%, worse than the -0.2% for September, but in line with the -0.5% operating margin in August. In fact, Kaufman Hall’s report shows hospitals had negative margins consistently throughout 2022, and the trend doesn’t bode well for the immediate future.
“October represented another month of negative operating margins for hospitals, with a slight downturn from September,” the flash report stated. “As the year comes to a close, compounding months of poor performance could signal continued difficulties for hospitals in the near future.”
One of the biggest pain points for hospitals is rising expenses, which they have faced all year. Inflation has reached 40-year highs over the past several months, with the consumer price index (CPI), which measures inflation, rising 7.7% over the last 12 months, according to the latest data from the Bureau of Labor Statistics. At the same time, hospitals are dealing with lower revenue thanks to, in part, sicker patients requiring longer stays and the loss of other revenue to offset their rising expenses.
There is also a big demand for services and a tighter labor market, leaving many hospitals turning to outsource some services, such as IT and human resources. Keeping these services in house would be a much lower cost.
The labor crunch has also caused issues with discharging patients, Kaufman Hall found in its latest report. With internal labor shortages and shortages in post-acute settings, hospital stays have increased slightly, but that hasn’t translated to higher revenue.
“Just a few months remain in what is shaping up to be one of the worst financial years on record for hospitals,” Erik Swanson, senior vice president with Kaufman Hall’s Data Analytics practice, said in a statement. “Expense pressures—particularly with the cost of labor—outpaced revenues and drove poor performance.”
The same staffing shortages are also impacting emergency department visits and operating room minutes, with both increasing slightly during October.
“The increase in emergency department (ED) visits put further strain on hospitals as many were unable to admit patients needing in-patient care due to staffing shortages. Many hospitals were forced to board patients in the ED leading to increased pressure on ED staff,” the report found.
The report samples actual and budget data from more than 900 hospitals.
Amy joined TriMed Media as a Senior Writer for HealthExec after covering home care for three years. When not writing about all things healthcare, she fulfills her lifelong dream of becoming a pirate by sailing in regattas and enjoying rum. Fun fact: she sailed 333 miles across Lake Michigan in the Chicago Yacht Club "Race to Mackinac."