June's National Hospital Flash Report from Kaufman Hall says hospital finances showed signs of stabilizing in a few key areas in May.
Healthcare leaders have been battling incessantly against poor operating margins and increases in expenses. But luckily for health systems such as Ascension Healthcare—who recently announced "significant improvement plans" focused on operational efficiencies and controlling expense growth amid a loss of almost $1.8 billion—stabilization may be on the horizon.
According to the June 2023 report, hospital finances saw slightly improved operating margins, declining labor expenses, and increases in outpatient visits, i.e., more reimbursement.
Here are three ways hospitals saw financial improvement in May:
Operating margins regain positive territory.
The median year-to-date (YTD) operating margin index for hospitals was 0.3% in May, up slightly compared to 0.1% in April and March, the report says.
Although operating margins are slowly regaining positive territory, they are well below levels during the latter half of 2021 and prior to the pandemic.
Labor expenses saw a decrease.
While labor costs remain significant, expenses were down 9% in May 2023 compared to May 2022. FTEs per AOB saw a decrease of 6% between May 2022 and 2023, and a decrease of 21% compared to May 2020.
Interestingly, April’s report showed that high expenses continued to put pressure on hospitals, with labor expense per adjusted discharge increasing 3% from March to April, that report revealed.
More hospital revenue is being driven by outpatient services.
Net operating revenue per calendar day was 9% higher in May 2023 compared to May 2022, while outpatient revenue per calendar day rose 14% over the same time frame.
“Now that hospital finances are showing signs of stabilization, it’s an opportune time for executives to reevaluate their longer-term business strategy,” Erik Swanson, senior vice president of Data and Analytics with Kaufman Hall, said in a statement.
“The continuing shift in patient demand from inpatient to outpatient services is particularly important and will inform business decisions for years to come,” he said.
The June 2023 National Hospital Flash Report draws on data from more than 1,300 hospitals from Syntellis Performance Solutions.
Amanda Norris is the Associate Content Manager of Finance, Payer, Revenue Cycle, and Strategy for HealthLeaders.
In May, hospital finances saw slightly improved operating margins, declining labor expenses, and increases in outpatient visits.
"Now that hospital finances are showing signs of stabilization, it’s an opportune time for executives to reevaluate their longer-term business strategy."