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Uncertainty Is The New Normal in Hospital Finance, Kaufman Hall

Analysis  |  By Amanda Schiavo  
   February 28, 2023

Hospitals are more financially stable than they were at this point in 2022, but significant challenges to their economic well-being persist.

As hospitals have shown slight financial improvements so far in 2023, the same challenges that made 2022 the worst financial year since the start of the pandemic haven’t abated.

Economic uncertainty is going to be the "new normal" for hospitals this year, according to the latest National Hospital Flash Report from Kaufman Hall. Hospitals started 2023 in a better financial position than in 2022, which coincided with the onset of the Omicron variant surge, however, numbers are still not where they were in 2020 and 2021.

The median year-to-date operating margin index for hospitals was -1% in January 2023, compared to -3.7% in January 2022. The 2023 year-to-date operating margin index was still lower than that of 2021 at -0.1%, and 2020 at 3.1%.

Hospitals are still struggling with persistent expense challenges as well as low patient volumes, emergency department visits, discharges, and total revenues. Labor expenses are still a significant challenge as are rising drug costs. Drug expenses have increased 12% compared to year-to-date 2020, according to Kaufman Hall.

"The trends in increased drug spending and decreased patient volume are indicators of a new landscape in how patients are utilizing hospital services in their care experience," Erik Swanson, senior vice president of data and analytics with Kaufman Hall, said in the report. "Hospitals continue to see outpatient sites driving increased revenue. Hospitals must continue to explore how to treat lower-acuity patients in novel settings as patient volumes shift to outpatient locations."

Amanda Schiavo is the Finance Editor for HealthLeaders.

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