Labor shortages, supply prices are factors in health system operating margins.
Hospitals and health systems had a challenging month during April, with decreases in patient volumes and revenues, and expenses lessening only slightly, according to analytical firm Kaufman Hall.
The figures show health care operating margins are “still very far from sustainable levels,” said the National Hospital Flash Report: May 2022, published May 31 by the Chicago-based consulting firm to analyze the previous month.
The median Kaufman Hall Year-To-Date Operating Margin Index was -3.09% through April, which also marked the fourth straight month of negative actual operating margins this year. The median change in operating margin was down 38.1% from March, and down 76% from April 2021.
Meanwhile, patient volumes and days declined in April. Patient days were down by 5.7% compared to March and 1.8% compared to April 2021. Adjusted patient days dropped 6.5% from March to April but were up 1.8% compared to April 2021. Adjusted discharges decreased 3.3% from March and decreased 0.3% compared to April 2021.
“Hospital patients in 2022 are likely sicker, harder to discharge, and more expensive to treat than hospital patients in 2021,” Erik Swanson, MPH, MS, Kaufman Hall senior vice president of data and analytics, said in a news release. “Fewer patients who are sicker and more expensive weigh heavily on hospitals’ operating margins, putting a strain on both expenses and revenue.”
Lower patient volume resulted in poor revenue performance in April, the analysis shows. Gross operating, inpatient, and outpatient revenues all dropped about 7% from March levels, but, all are up year-to-date compared with the same period in 2021, with gains of 6.6%, 5.3%, and 8.5%, respectively, the news release said.
“Volumes remained low this past month, as a growing number of infected patients likely remained home to sequester themselves with the virus,” the report said. “Other patients might have delayed care due to perceived danger over rising cases. Relative to last year, patients in April stayed in the hospital for longer periods, while discharges diminished, signaling a trend toward fewer, sicker patients who require more expensive care and are staying longer.”
Expenses dropped 4.3% from March but remain high compared to 2020 and above pre-pandemic levels. As in other areas of the economy, labor shortages and supply chain challenges contributed to expense levels. Expenses grew 8.3% since April 2021 and 9.6% year-to-date compared with the same period in 2021, according to the analysis.
“Labor shortages, high prices for supplies, and cost increases to treat sicker patients over longer stays are ballooning hospital expenses,” Swanson said. “With a bleak consensus outlook for the U.S. economy, those factors and their effects could be here for a while.
Extended negative margins are taking a financial toll on hospitals and health care systems, the report said.
“The first four months of 2022 have been challenging for the nation’s hospitals and health systems, which has been borne out in the losses many providers have reported so far this year,” Swanson said. “Even if margins return to pre-pandemic levels, many hospitals may likely end the year with substantially depressed margins.”