Report: Hospitals Face Financial Strain during 2022

January 30, 2023

Hospitals faced their worst financial year of the pandemic, with elevated labor expenses contributing to negative margins that persisted for most of 2022.

The latest Kaufman Hall snapshot, released Monday, includes data from more than 900 hospitals. The report summarizes the ways COVID-19 has changed patient care and created new financial challenges for hospitals.

“The pandemic fueled a fundamental shift in how patients are choosing to access their routine care,” said Matthew Bates, managing director and physician enterprise service line lead with Kaufman Hall.

Here’s what you need to know:

• Hospital margins:  Hospitals’ median year-to-date operating margin improved slightly (0.2%) from November to December, but about half of U.S. hospitals finished the year with a negative margin
• Labor costs:  During December, hospitals’ total labor expenses were up 24 percent year-to-date compared to pre-pandemic levels and 9 percent compared to 2021
• Other elevated expenses:  Total non-labor expenses were up 16 percent year-to-date from pre-pandemic levels, and 5 percent compared to 2021
  • During December, supplies (18%), drugs (18%), and purchased services (21%) were all up significantly year-to-date compared to pre-pandemic levels
• Patient trends:  Operating room minutes were down 2 percent from pre-pandemic levels, but remained flat when compared to year-to-date 2021 levels
• Quotable:  “As we saw throughout 2022, the labor market was unkind to hospitals and provider groups,” said Erik Swanson, senior vice president of data and analytics with Kaufman Hall.

HAP continues to advocate for additional resources to ensure Pennsylvania’s hospitals remain anchors within their communities. This includes providing education to state and federal leaders about hospitals’ financial strain and workforce challenges.

The Kaufman Hall report is available online.