Hospital Finances Show Signs of Recovery as Revenues Rise

Hospital finances are showing signs of recovery as margins continue to be positive and revenues are up from prior years, according to data from Kaufman Hall.

The National Hospital Flash Report reflects hospital financial performances during November 2023 and includes data from over 1,300 facilities.

The median calendar year-to-date operating margin index was 2.0 percent in November 2023, up from 1.5 percent in October. Operating margins have generally been on the rise since March 2023, when they emerged from the negatives.

Revenues have increased from November 2022, with net operating revenue per calendar day rising 6 percent and gross operating revenue per calendar day growing 8 percent. Inpatient revenue is up by 5 percent and outpatient revenue has increased by 9 percent year-over-year.

Revenue per adjusted discharge increased slightly compared to November 2022 and October 2023. Meanwhile, total expenses per adjusted discharge decreased month-over-month and year-over-year, indicating hospitals may be heading toward financial recovery.

Labor expenses per adjusted discharge also fell month-over-month (-2 percent) and year-over-year (-4 percent), reflecting reduced reliance on contract labor.

Total expenses (2 percent), labor expenses (1 percent), non-labor expenses (3 percent), and drug expenses per (3 percent) calendar day all increased slightly from October.

Patient acuity is returning to normal levels, as the average length of stay declined 6 percent year-over-year and 2 percent month-over-month.

Discharges and adjusted discharges per calendar day were up 2 percent from last month. Similarly, emergency department visits grew by 1 percent and operating room minutes increased by 2 percent month-over-month.

“As performance indicators stabilize, hospitals should take advantage of the relative stability and re-embrace strategic growth if they hope to see continued success in 2024,” Erik Swanson, senior vice president of Data and Analytics with Kaufman Hall, said in a press release emailed to RevCycleIntelligence.

“Growth strategies may vary from hospital to hospital, but all leaders should ensure that they are supporting goals beyond just profitability and scale, including business model transformation and diversification.”

Transitioning to value-based payment models can help healthcare stakeholders save money and support improved care delivery at hospitals. These payment arrangements can also help limit over-utilization and ensure patients are receiving care in the appropriate setting.