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Hospitals Face Financial Uncertainty during 2023

Labor expenses up while pandemic trends move patients to outpatient settings

March 01, 2023

U.S. hospitals continue to see higher labor expenses and lower patient volumes while adjusting to the ways COVID-19 has changed patient care.

The latest Kaufman Hall flash report indicates hospitals are facing a “new normal” as the “financial effects from the COVID-19 pandemic continue to linger.”

“The trends in increased drug spending and decreased patient volume are indicators of a new landscape in how patients are utilizing hospital services in their care experience,” said Erik Swanson, senior vice president of data and analytics with Kaufman Hall.

Here’s what you need to know:

  • Margins:  Hospital operating margins were down month over month, partially due to start-of-the-year purchases during January
    • The median year-to-date operating margin index for hospitals was -1 percent during January 2023, compared to -3.7 percent during January 2022.
  • Trends in care:  Emergency department visits (-5%), discharges (-2%), and net operating revenue (-3%) were all down month over month
  • Expenses:  Total expenses were up 1 percent month over month and 18 percent compared to year-to-date 2020 figures
    • Total labor expenses increased 3 percent month over month
  • Insights:  Elevated drug expenses (+12%) compared to year-to-date 2020 levels, lower patient volume, and longer emergency department stays indicate “that hospitals are serving sicker patients in inpatient settings since the start of the pandemic,” the report notes.
  • Quotable:  “Hospitals continue to see outpatient sites driving increased revenue. Hospitals must continue to explore how to treat lower-acuity patients in novel settings as patient volumes shift to outpatient locations,” Swanson said.

HAP continues to advocate for the necessary resources to ensure Pennsylvania’s hospitals remain anchors within their communities. Learn more about the “perfect storm” of challenges Pennsylvania hospitals are facing.

The Kaufman Hall report draws on data from more than 900 hospitals and is available online.