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Hospital Margins See Slight Uptick in November

Analysis  |  By Amanda Schiavo  
   January 10, 2023

Lower expenses and increased outpatient revenue drove improved month-over-month performance.

Hospitals saw a small increase in their operating margins in November 2022, thanks to lower expenses and an increase in outpatient revenue. However, operating margins remained negative for the year.

Hospital margins were up 12% month-over-month in November, according to the latest National Hospital Flash Report from Kaufman Hall. A decline in volume and shorter lengths of stay contributed to a 1% decrease in total expenses in November, according to the report.

"As we’ve seen in other industries, the significant increases in labor costs have made it harder for hospitals to realize positive margins," Erik Swanson, senior vice president of data and analytics with Kaufman Hall, said in an email release. "Hospitals were fortunately relieved of some financial pressure in November amid a continued competition in the healthcare labor market, potentially due to a shift away from expensive contract labor."

Hospital outpatient revenue saw a 10% year-over-year increase, although inpatient revenue was flat for the same period, according to the report. Hospitals will be able to lean on their outpatient services to address the challenges they are facing, the report says, which should help offset the way inpatient services are affecting margins.

"The November data, while mildly improved compared to October, solidifies what has been a difficult year for hospitals amidst labor shortages, supply chain issues, and rising interest rates," Swanson said. "Hospital leaders should continue to develop their outpatient care capabilities amid ongoing industry uncertainty and transformation."

Amanda Schiavo is the Finance Editor for HealthLeaders.

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