Hospital operating margins are stabilizing and up year-over-year.
Hospital finances started the year in encouraging fashion, showing that many operators’ bottom lines are holding steady.
However, Kaufman Hall’s National Hospital Flash Report for January highlights that challenges persist for struggling facilities, which means hospitals leaders should continue pursuing strategies to optimize healthcare delivery and the workforce.
“While hospital financials continue to show stabilization across all volume-adjusted metrics, a deeper dive into the data shows that not all organizations are experiencing the same stabilization,” Erik Swanson, senior vice president of Data and Analytics at Kaufman Hall, said in the release. “High-performing hospitals are doing better and better while lower financial performers have stagnated or seen their margins worsen.”
Here are three key figures from the report:
5.1%
The median calendar year-to-date operating margin index for January, it represented a slight decline from December but a higher relative mark to the same periods in 2022 and 2021.
Many of the hospitals that are operating a loss are ones in rural areas. According to a recent report by healthcare advisory firm Chartis, 50% of rural facilities are currently in in the red, up from 43% in the previous year.
Resources may be limited for hospitals and while the return on investment might not be showing up just yet, adopting and implementing new technology is something all leaders should be considering right now as a long-term solution for profitability.
1%
The month-over-month increase in net operating revenue per calendar day, it pales in comparison to the 5% gain in gross operating revenue per calendar day since December.
Kaufman Hall notes the difference in growth between the two could signal payers exerting their power in contract negotiations, as well as a shift to value-based payment models.
Solving for low reimbursement is an age-old problem for hospitals, but leaders can attack it through several strategies such as cost reduction and diversification of services.
3%
The month-over-month rise in labor expenses per calendar day, it’s relatively low considering the jumps in supply expenses per calendar day (4%) and drugs expenses per calendar day (6%) over the same period.
Year-over-year, labor expenses are up just 4% whereas total expenses have increased 6%, illustrating hospitals’ focus on cutting down on contract labor.
Jay Asser is the contributing editor for strategy at HealthLeaders.