Hospital margins saw minor improvements at end of 2022
Hospitals faced tough operating conditions in 2022, with many dealing with negative margins and billions of dollars in losses. However, margins saw a slight improvement just before the end of the year, according to the latest National Hospital Flash Report from Kaufman Hall.
The report samples from more than 900 hospitals on a monthly basis, using actual and budget data from Syntellis Performance Solutions.
The latest data revealed hospital margins were negative overall for 2022, but margins did improve in November. Margins were up 12% from the previous month, though the median Kaufman Hall Year-To-Date Operating Margin Index reflecting actual margins was -0.2% in November.
One of the biggest drivers of improved margins was a decline in hospital expenses during the month. Hospitals have seen expenses rise throughout 2022, eating away at their revenues and impacting margins through much of the year. In November, the average length of stay declined slightly, contributing to a 1% decrease in expenses and helping margins improve slightly. Additionally, labor expenses, which have driven a significant amount of healthcare costs, declined 2% during the month.
“As we’ve seen in other industries, the significant increases in labor costs have made it harder for hospitals to realize positive margins,” Erik Swanson, senior vice president of data and analytics with Kaufman Hall, said in a statement. “Hospitals were fortunately relieved of some financial pressure in November amid a continued competition in the healthcare labor market, potentially due to a shift away from expensive contract labor.”
Hospitals were forced to significantly increase their use of contract labor during the height of the COVID-19 pandemic to fill specific needs and roles. This led to higher costs, as these contract roles typically have higher rates, though the trend appears to be settling down.
Another bright spot for hospitals is outpatient services, which increased 10% year over year in November. Leaning on outpatient services may help hospitals overcome the loss of inpatient revenue.
“The November data, while mildly improved compared to October, solidifies what has been a difficult year for hospitals amidst labor shortages, supply chain issues, and rising interest rates,” Swanson said. “Hospital leaders should continue to develop their outpatient care capabilities amid ongoing industry uncertainty and transformation.”
Looking ahead into 2023, Swanson has previously stated he predicts many of the same issues from 2022 to continue plaguing hospitals, with ongoing impacts from the “tripledemic” of COVID-19, influenza and RSV.
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."