‘Skyrocketing’ Expenses Cloud Hospitals’ Financial Outlook

June 29, 2022

U.S. hospitals saw “skyrocketing expenses” offset revenue gains during May, according to the latest Kaufman Hall National Hospital Flash Report.

The report, released this week, indicates hospital margins are likely to remain below pre-pandemic levels if trends continue during the second half of 2022.

“While we are seeing hospitals revenues inch up, it simply is not enough to mitigate the skyrocketing costs of material and labor expenses, resulting in negative operating margins for the nation’s hospitals and health systems,” said Erik Swanson, a senior vice president of Data and Analytics with Kaufman Hall.

Here are five takeaways from this month’s report:

• Mixed margins:  Hospitals’ median year-to-date operating margin (-0.33%) was negative for the fifth straight month. Median change in operating margin improved from April to May by 18.9 percent, but was down 45.6 percent from a year prior.
• Expenses:  Total expenses rose 1.1 percent from April to May and 10.7 percent from the prior year. Inflation and labor shortages were two big factors leading total costs to increase 10.4 percent year-to-date.
• Revenue: The trend for summer scheduled procedures led to positive revenue changes. Gross operating revenue increased 3.4 percent from April and 7.6 percent from May 2021. Compared to May 2021, outpatient revenue was up 9.4 percent and inpatient revenue was up 2.6 percent.
• COVID-19 burden:  A decline in COVID-19 hospitalizations may have allowed patients to catch up on delayed care. Adjusted patient days increased 3.5 percent from April to May and 4 percent from May 2021 levels.
• Quotable:  “Hospitals are seeing labor costs increase at every level as they compete with other hospitals and local employers to retain and attract non-clinical staff with higher wages and better benefits,” Swanson said.

The report draws from a representative sample of 900 hospitals across the U.S. The full report is available to review online.