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Hospitals Face Continued Financial Pressures during March

May 04, 2023

Hospitals continue to maintain razor-thin margins, putting them in “a vulnerable position should a recession or a new public health emergency materialize,” according to a new report.

Released this week, the latest Kaufman Hall National Hospital Flash Report, shows that hospitals’ margins improved slightly month-over-month, but they remain below their pre-pandemic levels.

“Under the seemingly calm surface, there are significant challenges—especially labor shortages and diminished margins—that could quickly reach the surface should another crisis arise,” said Erik Swanson, senior vice president of data and analytics with Kaufman Hall.

Here’s what you need to know:

  • Overall:  Hospital operating margins stabilized in March, but remain near-zero levels.
  • Labor expenses:  Hospital total labor expenses increased 9 percent month-over-month, and are up 19 percent when compared to March 2020 levels.
  • Inflationary challenges:  Hospitals’ non-labor expenses rose by 6 percent from February to March. Supply expenses (+15%) and drug expenses (+14%) were significant contributors to total non-labor expenses.
  • Patient volumes:  Outpatient volumes increased month-over-month during March, with adjusted patient days and discharges increasing 12 percent and 14 percent, respectively. At the same time, the average length of stay declined 4 percent last month, a potential sign of a reduction in patient acuity.
  • Quotable:  “Hospitals face an ongoing bottleneck discharging to post-acute sites of care. Furthermore, workforce shortages still hamper hospitals' ability to treat patients admitted to their institutions,” the report notes.

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

Kaufman Hall’s national flash report includes data from more than 900 hospitals. The report is available to review online.