2022 to Become 'Worst Financial Year Hospitals Have Experienced'

Bottom lines remain in the red as federal support for hospitals dries up.

Between June and July of this year, hospitals’ financial performance plunged, following months of improvements, due to declining outpatient revenue, expensive inpatient stays, and decreasing operating room time, according to the latest National Hospital Flash Report from Kaufman Hall.

Hospitals and health systems are experiencing some of the worst margins since the beginning of the COVID-19 pandemic, putting 2022 on track to become the worst financial year for the healthcare sector since the crisis first started.

"Hospital and health system leaders are currently facing the most challenging year of the COVID-19 pandemic, as related financial hardships are no longer being offset by federal support," says Erik Swanson, a senior vice president of data and analytics with Kaufman Hall. "At the same time, hospital CFOs and other leaders must be able to respond to day-to-day challenges while building more sustainable strategies for their organizations."

The median Kaufman Hall year-to-date operating margin index was -0.98%, marking a seventh consecutive month of negative actual operating margins. The median percent change in operating margin in July was -63.9% from June 2022 and -73.6% from July 2021. Operating room minutes fell 10.3% from June 2022. However, the average length of stay rose 2% from June 2022 and 3.4% from July 2021, this is a sign that hospitals are treating sicker patients, according to Kaufman Hall. Patient days rose 2.8% from June to July but were down 2.6% compared to July 2021. Emergency department visits increased 2.6% from June to July. Gross operating revenue dipped 3.6% from June, outpatient revenue dropped 4.8% from June, and inpatient revenue dipped 0.7% from June and 1.5% from July 2021.

There are strategies c-suite leaders can implement that can help ease the pressure on hospital bottom lines, Swanson says. Some hospitals have already put these plans into action.

"Some hospitals are using data-driven approaches to more effectively deploy clinical staff—including creating float pools and leveraging technicians and nursing aides—to better manage variations in demand without relying on contract labor," he says. "Hospitals can also employ supply chain management strategies to improve vendor evaluation and use and identify efficiencies for greater scale. Hospitals and health system leaders can also identify and pursue long-term strategic investments and partnerships that will ultimately strengthen performance, which may include investments to build capacity in outpatient surgery settings to keep pace with shifts in patient preferences."