Hospitals make gains in financial performance: Report

Hospitals are showing some improvement in their financial performance, especially compared to pandemic levels.

Hospitals saw improved financial performance in October, particularly in outpatient revenue, according to the latest report from Kaufman Hall. (Image credit: ©ekapolsira - stock.adobe.com)

Health systems pulled in more revenue in October than in September, according to the newest installment of Kaufman Hall’s National Hospital Flash Report, which was issued Tuesday.

The monthly operating margin index for October was 3.3%, compared to 0.9% in September, the report states.

The recovery has been slow and difficult for many hospitals and health systems, but the latest data shows they are making some progress, said Erik Swanson, senior vice president of data and analytics at Kaufman Hall.

“Hospitals are continuing to experience financial stabilization and are increasingly adopting strategies to build resilience and minimize vulnerability,” Swanson said in a statement. “Key strategies include investing in technology, strengthening relationships with post-acute providers, expanding outpatient footprints, and deploying workforce optimization techniques.”

Hospitals continue to see greater gains from outpatient revenue than inpatient revenue, a trend that analysts have said is likely to continue.

Outpatient revenue rose 3% from September to October. Perhaps more significantly, outpatient revenue in October 2023 is 12% higher than in October 2022.

Emergency department visits dropped in October, and the report suggests the decline is tied to more people choosing outpatient care. Emergency department visits fell 2% from September to October.

Inpatient revenue climbed 2% from September to October and was 7% higher in October 2023 than in the same month last year.

Hospitals say they are facing higher labor costs, but the latest report suggests they are stabilizing. Labor expenses per calendar day remained flat from September to October, though they are 3% higher than in October 2022.

Health systems are seeing higher costs in other areas.

Supply expenses per calendar day rose 4% from September to October, and they are 11% higher year-over-year. In addition, drug expenses rose 2% from September to October and have risen 10% since October 2022.

Health systems appear to be performing more surgical procedures. Operating room minutes increased 6% from September to October, and they are 5% higher than in October 2022.

The average length of a hospital stay rose 1% from September to October, though it’s down 7% compared to October 2022.

To be sure, some hospitals continue to face serious financial difficulties, and even those faring better are seeing modest margins. Health systems say they are seeing more claim denials, and that’s eating into their cash reserves. Hospitals say they are seeing more problems with denials from Medicare Advantage plans.

While volume has improved in recent months, many say patient visits haven’t returned to pre-pandemic levels, and some analysts wonder if that’s going to happen.

Still, Moody’s Investors Service has projected that nonprofit hospitals should see more revenue in 2024. Moody’s revised its 2024 outlook for nonprofit hospitals, raising its forecast from “negative” to “stable.”

The National Hospital Flash Report draws on data from more than 1,300 hospitals from Syntellis Performance Solutions.