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Hospitals Likely to End 2022 in the Red

Hospitals report strong August, but financial volatility due to COVID-19 continues

October 03, 2022

Hospitals continue to struggle with fluctuating margins and are likely to end 2022 in the red, according to the latest analysis from Kaufman Hall.

In today’s National Hospital Flash Report, Kaufman Hall indicated that U.S. hospitals had improved financial metrics during August, but are “still operating substantially below pre-pandemic levels.” 

“August was a better month for hospital patient volumes with both elective surgeries and discharges up, which combined to improve revenues,” Erik Swanson, a senior vice president of Data and Analytics with Kaufman Hall, said in a statement.

Here's what you need to know:

  • Margins:  During August, the median year-to-date operating margin for U.S. hospitals remained in the red (-0.3%). Operating margins improved by a median of 4.2 percentage points compared to the previous month.
  • Uptick in elective procedures:  Operating room minutes increased 13.6 percent from July, as patients likely returned to receive elective procedures that had been delayed during previous COVID-19 surges.
  • Revenue:  Gross operating revenue was up 9.1 percent from July 2022, as were outpatient revenue (10.9) and inpatient revenue (4.9%).
  • Expenses:  During August, total expenses rose 3.3 percent and are up 6 percent compared to August 2021. Supply (10.7%) and drug (8.8) expenses contributed the most to hospital costs, while labor remained relatively flat (1.3%).
  • The big picture:  “Most metrics improved month-over-month in August as revenues increased and expenses slowed their climb compared to July,” the report noted. “However, organizations are still in poor shape, with a negative median operating margin.” 

“Despite the short-term improvements, though, overall hospital performance is still well below pre-pandemic levels,” Swanson said. “In addition, hospitals need to reckon with new market entrants, like urgent care centers and free-standing surgery centers, that are chipping away at hospital outpatient revenues and overall margins.”

The Kaufman Hall report includes data from 900 hospitals to provide an overview of the financial outlook for U.S. hospitals. The report is available to review online.