The Financial Pressures Facing U.S. Hospitals

June 08, 2022

U.S. hospitals faced considerable financial pressures during April, with plummeting patient volumes and revenues and expenses remaining high.

Hospitals are working to stabilize operations following the winter Omicron surge and the recent spike in COVID-19 cases, according to Kaufman Hall’s latest national flash report. The complexity of patient care has offered another layer to these challenges, said Erik Swanson, a senior vice president of data and analytics with Kaufman Hall.

“Hospital patients in 2022 are likely sicker, harder to discharge, and more expensive to treat than hospital patients in 2021,” Swanson said. “Fewer patients who are sicker and more expensive weigh heavily on hospitals’ operating margins, putting a strain on both expenses and revenue.”

Among the notable takeaways:

• Difficult Margins:  Kaufman Hall’s year-to-date operating margin index showed actual margins were -3.09 percent through April. The median change in operating margin was down more than 38 percent from March to April and 76 percent from April 2021.
• Volumes:  Patient days were down by 5.7 percent from April to March and 1.8 percent from April 2021. Operating room minutes declined 8.9 percent from March to April and 6.2 percent year-over-year.
• Revenue:  While still up from 2021 levels, gross operating, inpatient, and outpatient revenues all dropped about 7 percent from March to April.
• Expenses:  Total expenses declined 4.3 percent from March to April but were up 8.3 percent year-over-year and 25.2 percent compared to year-over-year 2020.
• Quotable:  “Labor shortages, high prices for supplies, and cost increases to treat sicker patients over longer stays are ballooning hospital expenses,” Swanson said. “With a bleak consensus outlook for the U.S. economy, those factors and their effects could be here for a while.”

Notably, total labor expenses were down 4.2 percent from March to April but were up 11.1 percent year-over-year and 26.2 percent compared to 2020 levels.

Kaufman Hall’s monthly flash report draws on data from more than 900 hospitals. The report is available to review online.

HAP continues to advocate for additional resources and support for Pennsylvania’s hospitals as they respond to COVID-19 and maintain their routine operations. As part of this effort, HAP recently sent a letter to Pennsylvania’s Congressional delegation urging lawmakers to provide relief from Medicare cuts that threaten their ability to care for patients.

Read the letter online.