It’s good to periodically take stock of where we stand. That’s true for our personal health, and it’s also true as it concerns the health of the hospital industry as a whole.
Nine months into what researchers at healthcare firm Kaufman Hall call “an extremely challenging year,” American hospitals and health systems are still operating substantially below pre-pandemic levels. While most metrics improved in August as compared to July, September numbers are still somewhat anemic, indicating that healthcare organizations have a way to go before getting back to a firmer footing—especially from a financial standpoint. The following will act to summarize the latest assessment of U.S. hospital health based on a September report published by Kaufman Hall.
Margins
The median year-to-date (YTD) operating margin Index reflecting actual margins was -0.3 percent through August. This highlights the continuing losses that American hospitals have experienced thus far in 2024. While this is disappointing, hospital executives can be somewhat encouraged to know that this may actually point to some slight signs of improvement. This is because operating margins improved by a median of 4.2 percentage points from last month.
So, month to month, we may be heading in the right direction, but the fact is that hospital operating margins remain down by a median of 2.1 percentage points from last year. Similarly, operating EBITDA margins also demonstrated monthly improvement, with a median increase of 3.7 percentage points. Nevertheless, EBITDA margins are still down by 2 percentage points from a year-to-year standpoint.
Volumes
The good news is that outpatient volumes rose in September as it appears that more patients finally determined it was time to undergo those elective procedures they had put off during what some are calling “the COVID surge.” Here is a snapshot of some of the important volume-related data as found in the September report:
- Operating room minutes rose 13.6 percent from July and were up 5.5 percent year-over-year.
- Length of stay dropped 2.1 percent from July and decreased 2.7 percent compared to August 2021.
- Patient days rose 0.7 percent from July and dropped 7.9 percent from August 2021 levels.
- Adjusted discharges jumped 7.0 percent month-over-month and were up 5.4 percent compared to August 2021.
- Emergency Department visits rose 1.1 percent from July but were down 2.4 percent year-over-year.
Revenues
The Kaufman Hall report indicates that there were volume increases last month. This was largely due to improved outpatient activity, which further contributed to improved revenue performance in August. Here are some of the details:
- Gross operating revenue was up 9.1 percent from July and 5.5 percent year-over-year. It is also up 5.5 percent year-to-date.
- Outpatient (OP) revenue jumped 10.9 percent from July levels and is up 10.6 percent year-over-year. It is up 7.8 percent year-to-date.
- Inpatient (IP) revenue also rose 4.9 percent from the previous month but is down 3.5 percent from August 2021. It is up 2.3 percent year-to-date.
Expenses
It should come as no surprise that hospital costs continue to rise. Here’s the breakdown from the September report:
- Total expenses rose 3.3 percent from July to August and jumped 6 percent from August 2021, likely driven by supplies and drug costs. Total expenses are up 8.9 percent year-to-date
- Total labor expenses are up just 1.3 percent month-over-month, as compared to 10.6 percent year-to-date.
- Labor expense per adjusted discharge dropped 5.3 percent from July, indicating that contract labor utilization and rates are gradually cooling. However, this metric is up 9.9 percent year-to-date.
- The full-time employees per adjusted occupied bed (FTEs per AOB) rate is down 3.3 percent from July, indicating that “the labor shortage is still very much in effect.”
So, hospital decisionmakers have some new numbers to chew on. All they can do is look at these national trends, compare them to the situation in their own facilities, and determine a way forward that makes sense from a financial health, as well as a patient health, perspective.