Hospitals still facing financial struggles in 2023

After ending 2022 with one of the worst operating environments since the start of the COVID-19 pandemic, hospitals and health systems are still facing financial challenges in 2023.

That’s according to the latest National Hospital Flash Report from Kaufman Hall, which found hospitals entered 2023 on more stable footing compared to the year prior, but beginning-of-the-year performance was still lagging. Hospitals specifically started 2023 with no spike in COVID-19 cases, unlike in 2022, when January coincided with the Omicron spike. That helped 2023 start stronger, but financial performance was still behind 2021 and 2020. 

Hospital margins in January 2023 were down compared to December 2022, though this is a normal dip and trend for hospitals making purchases for the year in January, Kaufman Hall reported. Hospital margins were -1% for January, compared to -0.7% in December 2022.

Overall, hospitals face higher expenses and lower volumes at the start of 2023, similar to 2022. Volumes, emergency department visits, discharges and total revenues were down in January 2023 compared to the month prior. Labor expenses continued to rise for hospitals, though not as fast as other months. Labor expenses rose 3% from December 2022 to January 2023, the report found. Compared to 2020, labor expenses are up 21% year to date for 2023.

“Hospitals entered 2023 on more stable footing, following the worst financial year since the start of the pandemic,” Erik Swanson, senior vice president of Kaufman Hall, said in a statement. “However, they still face a range of persistent challenges, including higher labor expenses, lower patient volumes, and a fundamental shift in where patients access care services.”

One big reason for lower patient volumes is from the ongoing shift of patients using outpatient facilities for more care. This means hospitals will have to adapt to this shift and “must continue to explore how to treat lower-acuity patients in novel settings,” the report stated. 

For January 2023, discharges were down 2% from the previous month, while emergency department visits were down 1% while average length of stay rose 4%.

Looking further into 2023, hospitals should also brace for more financial challenges ahead, with more COVID-19 surges likely to come. 

Amy Baxter

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."

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