In July, the consulting company’s August 2019 National Flash Report of metrics from more than 600 hospitals showed health systems saw discharges, emergency department visits and adjusted volume metrics improved about 3% to 4% from the previous month.
After a rather lackluster financial performance in June, U.S. hospitals appeared to bounce back in July thanks to an unexpected uptick in inpatient and emergency department volumes, a new report from Kaufman Hall found.
In general, over the last year Kaufman Hall has seen institutions largely responding well to the larger trend of reducing inpatient volumes and managing their cost structures accordingly, Managing Director Jim Blake told FierceHealthcare.
But “what we saw last month was a little bit of the wheels falling off the bus,” Blake said. “We saw the volume decreases were bigger, the profitability on the month-over-month and year-over-year bases were much worse. We saw institutions, on average, not handling it. It was a pretty bad month.”
Then, in July, the consulting company’s August 2019 National Flash Report of metrics from more than 600 hospitals showed health systems saw discharges, emergency department visits and adjusted volume metrics improved about 3% to 4% from the previous month. Operating room minutes rose 8.1%, and adjusted patient days were up 4.5%.
“Just as June was unexpectedly bad, July was unexpectedly good,” Blake said.
While that unexpected bump was good news for hospitals, it also indicates many of these organizations—particularly the largest and smallest hospitals—don’t have the ability to flex with the shorter-term market fluctuations, said Kaufman Hall Vice President Erik Swanson.
“When we look at how hospitals respond to some of those factors that they cannot control, like volumes, what we’ve been seeing as an overall trend is the inability to necessarily flex particularly well with volumes,” Swanson said. “What we saw in June and what we’ve seen as a trend over the last year or so is at many of these organizations, as volumes decrease on the inpatient side, their profitability in general decreases. When the volumes increase, they tend to do pretty well.”
Beyond that, while Swanson said there have been continued indicators of more efficient management of labor expenses, those efficiencies appear to be slowing in recent months.
“The rate of that decrease is slowing meaning that many of those organizations are starting to get less juice for the squeeze in some of that because their beginning to hit those limits of traditional blocking and tackling of labor management and its not until they move to some more data-driven approaches that they’re able to do a little better.”
On the non-labor side of costs, Swanson pointed out hospitals are still grappling with continued pressures from increasing drug expenses that exceed inflation. Last month’s increased inpatient volumes and patient acuity drove some pretty substantial increases in drug and supply expenses, he said.
“The drug companies continue to hold the hospitals over the barrel with price increases that just continue and continue and continue,” Black said. “Any one month isn’t enough to make a difference. But if you add it up over the 13 months we’ve been watching this closely, there’s a shift in materiality. Drug prices—if you extend it back several years before this trend started—were fairly steady year over year for a bunch of years and the pharma companies, whatever they’re doing, they’re knowing how to become more profitable.”
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