After Improvement, Hospital Financial Performance Takes Another Hit

 For U.S. hospitals and health systems, 2022 is shaping up to be the worst year of the pandemic in terms of financial performance, according to the latest National Hospital Flash Report from Kaufman Hall.

Facilities are now experiencing "some of the worst margins" since COVID-19 emerged, the report stated. The finding comes as gains that hospitals saw in recent months reversed in July.

Specifically, the median Kaufman Hall operating margin index was -0.98% through July, according to the report. The median percent change in operating margin in July was -63.9% from June 2022 and -73.6% from July 2021.

It's worth noting that, even in the good years, pre-pandemic margins are "typically quite narrow," such as in the 3.5% to 4% range, Erik Swanson, MPH, MS, a senior vice president of data and analytics with Kaufman Hall, told MedPage Today. That narrow margin is what is allowing organizations to reinvest.

Now, more than halfway through 2022, having operating margins well into the negative zone and down 73% year-over-year is "very, very troubling," Swanson said. "It's really quite stark."

The report notes that outpatient volumes "shrunk revenues," and that expenses jumped up from June. Additionally, hospitals can "no longer count on supplemental federal funding to buffer these mounting losses, as they did in previous pandemic years," the report stated.

Outpatient volumes decreased in July, as more patients likely scheduled procedures in ambulatory settings instead of within hospital walls, according to the report. Operating room minutes dropped 10.3% from June and 7.7% year-over-year.

However, the average length of stay ticked up 2% from June 2022 and 3.4% from July 2021, signaling that hospitals are now treating sicker patients.

Additionally, patient days increased 2.8% from June to July of this year, but were down 2.6% compared to July 2021, the report states. Emergency department visits increased 2.6% from June to July.

The report further notes that volume reductions resulted in poor revenue performance last month. Gross operating revenue was down 3.6% from June, and outpatient revenue dropped 4.8% over the same period. Inpatient revenue also dropped 0.7% from the previous month, and was down 1.5% from July 2021.

Total expenses slightly decreased by 0.4% from June to July of this year, and increased 7.6% from July 2021, according to the report. Inflation and labor shortages contributed to total costs climbing 9.6% year-to-date.

"Despite the poor performance, leaders should not lose sight of long-term capital and strategic planning, despite the urgency of day-to-day pressures," the report stated.

In terms of staffing, organizations may look to more data-driven approaches to optimize their workforce, aimed at ensuring they have the appropriate coverage for volumes but at the lowest cost, Swanson told MedPage Today. They may also consider the creation of internal and larger float pools of staff as well as the development of an internal staffing agency or re-negotiating contract labor.

Some of the other areas facility leaders may examine to help address current financial pressures include their supply chain management and re-negotiating contracts with their vendors, Swanson said. Additionally, it will be important to consider how patients are shifting where they choose to access care.

https://www.medpagetoday.com/special-reports/features/100450