Hospital Margins Improve Slightly during November

Overall margins remain in the red year-to-date

January 04, 2023

The nation’s hospitals saw improved financial performance during November, but still reported negative margins to date, according to a new report from health care analyst Kaufman Hall.

The latest Kaufman Hall National Hospital Flash Report released today provides an ongoing review of the financial conditions at U.S. hospitals. This month’s report noted the way hospital labor costs and patient volume affect overall margins, as well as trends in inpatient and outpatient revenue. 

“Hospitals were fortunately relieved of some financial pressure in November amid a continued competition in the (health care) labor market, potentially due to a shift away from expensive contract labor,” said Erik Swanson, senior vice president of data and analytics with Kaufman Hall.

Here’s what you need to know:

• Negative operating margins:  The Kaufman Hall median year-to-date operating margin index reflecting actual margins was -0.2 percent in November, a slight improvement from the previous month (-0.3%). During December 2021, the national operating margin index was 4.3 percent.
• Expenses improve slightly:  Hospitals saw a 1 percent decline in expenses from October to November, but remained up 7 percent year-to-date. The decline in labor expenses (-2%) played a significant role in the monthly decline in hospital costs.
• Patient acuity:  Average length of stay (-1%), operating room minutes (-2%), and adjusted patient days (-2%) all declined month-over-month. 
• Outpatient revenue improves:  Hospital outpatient revenue has been a strong point, increasing 10 percent year-over-year. Inpatient revenues have remained flat during that span.
• The bottom line:  “The November data, while mildly improved compared to October, solidifies what has been a difficult year for hospitals amidst labor shortages, supply chain issues, and rising interest rates,” Swanson said. “Hospital leaders should continue to develop their outpatient care capabilities amid ongoing industry uncertainty and transformation.”

HAP continues to advocate for the necessary resources to ensure Pennsylvania’s hospitals can continue to deliver outstanding care in their communities.

The National Hospital Flash Report uses data from the last three years from more than 900 hospitals. The report is available to review online.