Latest Kaufman Hall Data Shows Healthcare Organizations to End 2022 in the Red

Rising expenses are still wreaking havoc on hospitals and health systems.

Hospitals and health systems have been struggling financially as they try to navigate the COVID-19 crisis, inflation, labor shortages, and rising expenses. This confluence of challenges means these organizations are going to finish out the year in the red, according to the latest National Hospital and Physician Flash reports from Kaufman Hall.

Hospitals and health systems saw negative margins for the ninth consecutive month, according to the Kaufman Hall research. The median year-to-date operating margin index for hospitals was -0.1% in September.

"Health systems are starting to get a clear picture of what service lines have a positive effect on their margins and which ones are weighing them down," Matthew Bates, managing director and Physician Enterprise service line lead with Kaufman Hall, said in an email statement. "Without a positive margin, there is no mission. Health systems must think carefully and strategically about what areas of care they invest in for the future."

Organizations also saw revenues decline for the third quarter as the adjusted patient days and emergency department visits both dropped 3% from August. Operating room minutes decreased 5% from September, which also hurt hospital revenues.

There was a rise in physician practice volumes for the third quarter, however, rising expenses are still taking a toll on organizations. Hospital total expenses dropped slightly in September, down 1% from August, but are up 3% from September 2021.

"Heading into the final quarter of the year, hospitals and physician practices have had little reprieve during a very difficult 2022 from a financial perspective," Erik Swanson, a senior vice president of Data and Analytics with Kaufman Hall, said in the email statement. "Hospitals and physician practices could climb back into the black by the end of the year, but it is looking less and less likely as months of negative margins continue to pile up."