Hospitals improve in August, but stuck in red for 8th consecutive month

Hospital performance improved in August, but health systems are still in negative territory, Kaufman Hall said in its new report.

The median Kaufman Hall Year-To-Date (YTD) Operating Margin Index was -0.3% through August, the consulting firm said in its new monthly report, which came out Monday. The index has been in negative territory for all of 2022 so far.

“Nine months into a challenging year, margins have fluctuated wildly,” the report states. “Although most metrics improved from July to August, organizations are still operating with negative margins and well below pre-pandemic levels.”

Even with hospitals making gains in some areas, “organizations are still in poor shape, with a negative median operating margin,” Kaufman Hall stated. Hospitals have higher expenses and lower volume compared to the levels before the COVID-19 pandemic began.

Hospitals are losing billions of dollars this year. Kaufman Hall prepared a report on hospital performance for the American Hospital Association last month. Its stark conclusion: More than half of all hospitals are projected to have negative margins for the rest of the year.

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Hospitals are seeing some improvement, but they are also seeing more competition in the form of urgent care centers and surgery centers, said Erik Swanson, senior vice president of data and analytics with Kaufman Hall.

“August was a better month for hospital patient volumes with both elective surgeries and discharges up, which combined to improve revenues,” Swanson said in a statement.

“Despite the short-term improvements, though, overall hospital performance is still well below pre-pandemic levels,” he 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.”

As part of their long-term planning, health system executives should be considering ways to provide care outside the hospital, Kaufman Hall suggests.

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The latest report isn’t as dreary as some of Kaufman Hall’s other reports this year. Hospitals brought in more revenue, largely as they treated more patients.

Some patients returned to hospitals for elective procedures, the report suggests.

Operating room minutes frose 13.6% from July to August and were up 5.5% year over year. Patient days rose slightly from July (0.7%), but are down 7.9% compared to August 2021. Emergency department visits increased 1.1% from July, but they are down 2.4% compared to August 2021.

Adjusted discharges rose 7% from July to August and were up 5.4% compared to August 2021.

The average length of stay in hospitals dropped a bit in August, falling 2.1% compared to July. In recent months, hospital leaders have said they are seeing patients who deferred care during the pandemic and are now sicker, requiring longer and more expensive stays.

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Gross operating revenue jumped 9.1% from July and is 5.5% higher than in August 2021. Outpatient revenue rose 10.9% from July and is up 7.8% year-to-date. Inpatient revenue rose 4.9% from July to August, and is up 2.3% year-to-date.

Total expenses rose 3.3% from July to August and are 6% higher than August 2021. Total expenses are up 8.9% so far in 2022. Hospitals paid more for supplies in August, with supply costs rising 10.7% compared to July.

Labor expenses rose 1.3% from July to August, but have jumped 10.6% since January.

The number of full-time employees per bed dropped 3.3% in August, compared to July. Kaufman Hall said that indicates “the labor shortage is still very much in effect.”

Kaufman Hall examines data from more than 900 hospitals to produce its report.