Calendar year to date margins have remained slightly above 4% since February 2024.
After a rocky few years post-COVID, hospital operating margins are trending in a positive—and profitable—direction. However, leaders shouldn’t let up on their financial budget and revenue strategies.
In its annual National Hospital Flash Report, Kaufman Hall published a calendar year to date operating margin index, illustrating a steep increase from 2.7% in December 2023 to 4.9% in January 2024. After a slight decrease in February 2024 to 4.4%, margins have consistently remained just above 4%.
Regional operating margins were mostly positive, with hospitals in the Great Plains being the exception, having a margin of -7%. The report noted that 340B settlement payments also contributed to improved margins.
Containing Costs
Hospital leaders have seen success monitoring and containing expenditures. Revenue cycle management technology can be beneficial here, particularly automated solutions which can complete redundant administrative tasks with quick efficiency.
At One Grady, a subsidiary of Atlanta’s Grady Health System, staff rely on automated solutions within the EHR and those created by in-house developers to streamline workflows, minimize staff effort, and cut costs.
“Beyond that,” Monica Richey, vice president of physician revenue cycle for One Grady, said. "We’re having to be very intentional and strategic about the way in which we handle denials and really dig into how we operationalize our workforce to be able to manage those denials.”
In addition to sporadic policy updates, payers are implementing technology into their operational processes, outpacing the solutions hospitals and health systems are using. Because of this, leaders are leveraging the efforts of staff and solutions to their full capabilities.
While the RCM solutions can aggregate and cross-reference information from different sources, staff can form siloed teams to analyze claims and prior authorization denial data for trends.
Revenue cycle specialists at Carle Health take this strategy a step further by bringing system leaders into the process so that they’re able to assist with resolving the denials.
“Payers rely on technology solutions just like we do to manage processes on their side,” Aron Klein, the system’s vice president of finance operations and supply chain, said. “Which ultimately if something [happens] on their side, it takes time to resolve, which ultimately delays processing or receipt of payment on our side.”
Jasmyne Ray is the revenue cycle editor at HealthLeaders.
KEY TAKEAWAYS
CYTD margins have increased from 2.7% in December 2023 to 4.9% in January 2024.
Regional margins were largely positive, with the exception of hospitals in the Great Plains having an operating margin of -7%.