Most hospitals underperformed in June

While margins continued to improve for hospitals, most of them underperformed in June thanks to high expenses and economic pressures, according to Kaufman Hall.

June saw a median calendar year-to-date operating margin index of 1.4%, with fiscal year-end accounting adjustments contributing a slight bump in performance, according to Kaufman Hall’s National Hospital Flash Report. The gap between high-performing hospitals and those struggling in the current economic environment continues to widen.

The Physician Flash Report found that despite the economic challenges, physician and provider productivity climbed as patient increasingly seek care in ambulatory settings. Net patient revenue per provider full-time equivalent (FTE) is up 10% from last year, but this was not enough to offset rising expenses as the median investment/subsidy per provider still rose 5% year-over-year to $224,243, according to the report. The total direct expense per provider FTE reached $611,519, a 4% increase compared to the second quarter of 2022.

“As labor continues to be the largest share of expenses, health systems need to think strategically about provider employment models,” said Matthew Bates, managing director and Physician Enterprise service line lead with Kaufman Hall, in a statement. “Organizations that want to see performance improvement must figure out how best to effectively integrate advanced practice providers into the care team model.

The report notes that the challenges facing hospitals remain but have stabilized, allowing organizations the chance to consider the measures needed to return to profitability.The proportion of FTEs per adjusted occupied beds decreased 8% from May, which may indicate higher levels of workforce reductions and staff turnover as hospitals begin taking the steps needed to survive, according to Kaufman Hall experts.

“This ‘new normal’ is an incredibly challenging environment for hospitals,” said Erik Swanson, senior vice president of Data and Analytics with Kaufman Hall, in a statement. “It’s time for hospital and health system leaders to begin developing and implementing a strategy for long-term sustainability, including expanding their outpatient footprint and re-evaluating where finite resources are being utilized.”

The National Hospital Flash Report draws on data from more than 1,300 hospitals from Syntellis Performance Solutions. The Physician Flash Report draws on data based on more than 200,000 providers, also from Syntellis.