Margins are improving, but hospitals face a long road to recovery from the COVID-19 pandemic
Hospital and health systems saw incremental improvements in March, with rising margins and fewer COVID-19 cases and hospitalizations. However, there’s still a long road to recovery for hospitals to dig out of the impacts of the ongoing pandemic.
That’s according to the latest National Hospital Flash Report from Kaufman Hall. The median change in operating margin rose a whopping 32.7% from February to March, and 85.6% from March 2020, when hospitals were hit hardest by the pandemic. While margins rose from the previous month, they were actually down 48.7% from March 2021, according to the report.
During March, COVID-19 cases and hospitalizations declined throughout the month. The 7-day moving average of new cases decreased 53.3% from March 1 to 25,559 on March 31. The 7-day moving average of new daily admissions dropped 64.9% over the same period, to 1,506 by month’s end. That decline helped hospitals that may have been strained by the pandemic. Hospitals and health systems are still facing numerous other challenges, including inflation and labor shortages.
Even as margins rose, March marked the third consecutive month for negative margins overall. The median Kaufman Hall year-to-date Operating Margin Index was -2.43% in March, up from -3.99% in February.
At the same time, outpatient volumes improved in March, and inpatient volumes continued to rise, albeit at a slower pace compared to recent months. During the month:
- Patient days rose 4.3% versus February and 1.2% year over year.
- Adjusted patient days increased 12.5% month-over-month and 4.2% year over year.
- Adjusted discharges rose 18% from February and 0.5% year over year.
- Average length of stay fell 6.2% from February levels thanks to fewer high-acuity patients needing longer stays.
Notably, hospitals saw some relief for expenses, “as volume growth outpaced expense growth in March, but labor shortages, supply chain issues and inflation continue to push expenses up relative to prior years,” the report stated. Gross operating revenue was up 14% from February and 6.6% year over year. Compared to March 2020, gross operating revenue was up 35.1% in March 2022. The revenue bump was in part explained by a 16.1% increase in outpatient revenue over February ,2.7% year over year and 34.9% versus the first month of the pandemic in March 2020.
While signs are pointing to improving environments for hospitals, more recovery is still needed.
“Despite signs of improvement in March, actual year-to-date hospital operating margins remained in the red for a third consecutive month, and adjusted expenses remain well above 2021 and 2020 levels as healthcare continues to cope with inflation, supply chain challenges, and widespread labor shortages,” the report concluded.
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."