The Next Financial Moves for U.S. Hospitals

August 02, 2023

High expenses and continued economic pressures are challenging the nation’s hospitals, according to the latest data from Kaufman Hall.

While hospitals have seen some margin improvement, most still underperformed compared to May, according to the latest Kaufman Hall National Hospital Flash Report.

“This ‘new normal’ is an incredibly challenging environment for hospitals,” said Erik Swanson, senior vice president of data and analytics with Kaufman Hall.

Here’s what you need to know:

• Margins:  Kaufman Hall’s median calendar year-to-date operating margin index for hospitals was 1.4 percent during June. Fiscal year-end accounting adjustments likely contributed to a slight bump in performance.
• Expenses:  Per calendar day, hospitals saw month-over-month increases in supply expenses (4%), drug expenses (4%), and purchased services (5%). Per calendar day labor expenses remained level month-over-month.
• Care trends:  Average length of stay (-2%) and emergency department visits per calendar day (-2%) decreased, while operating room minutes per calendar day remained level month over month.
• Action steps: The Kaufman Hall report includes key next steps for hospitals, such as strategic allocation of resources, adjusting for increased outpatient care, building relationships with physician groups, and pathways to post-acute transitions.
• Quotable:  “It’s time for hospital and health system leaders to begin developing and implementing a strategy for long-term sustainability, including expanding their outpatient footprint and re-evaluating where finite resources are being utilized,” Swanson said.

Kaufman Hall’s monthly National Hospital Flash Report includes data from more than 1,300 hospitals and provides a recurring view of national financial trends. The report is available to review online.