Hospital margins fall behind pre-pandemic levels
Hospitals are facing their toughest margins yet, and 2022 is on pace to be one of the worst financial performances for the space in years.
That’s according to the latest National Hospital Flash Report from Kaufman Hall, which found hospital margins were -0.98% through July. The change from a year prior and even the previous month was drastic. Operating Margin was down a median of -63.9% from last month and -73.6% from July 2021. Operating EBITDA Margin was down a median of -45.2% month-over-month, and -49% from July 2021.
The latest report erases gains made by hospitals in the past few months, and hospitals are facing a loss of federal funds to offset the huge losses this year, compared to prior pandemic years. Rising labor expenses are taking a big hit out of operating margins in the latter part of 2022, even as hospitals hired more aggressively. Total expenses fell 0.4% for hospitals, from June to July, but rose 7.6% from a year prior. Year to date, expenses are up 9.6%, thanks to high labor costs and inflation. Labor expense per adjusted discharge rose 3.5% in July and is up a whopping 13.9% year to date. According to Kaufman Hall, this is “a sign that the labor shortage is still going strong.”
[AHA: Rising hospital expenses are 'unsustainable']
In addition, sicker patients are staying in hospitals longer, driving up costs, while pent-up demand for outpatient procedures dropped, as those with the BA.5 Omicron variant of COVID-19 stayed at home to recover.
Operating room minutes fell 10.3% from June and 7.7% year-over-year. Length of stay rose 2% during the month and is up 3.4% from July 2021, a “sign that the patients coming into the hospital were sicker,” the report stated. Emergency department visits were up 2.6% from June to July, and were elevated 0.7% from a year prior.
Overall, hospitals reported poor revenues in July thanks to volume reductions, with gross operating revenue falling 3.6% from June, although it was up 1.2% year-over-year. Year to date, it is up 5.5%. Outpatient revenue fell 4.8%, though it was up 0.6% from last year. Inpatient revenue dropped 0.7% from the previous month, and down 1.5% from July 2021. However, it is up 3.6% year to date.
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."