Hospitals See Financial Relief as Revenues Increase, Margins Stabilize

Hospitals are seeing some financial relief as revenue increases offset rising expenses and operating margins stabilize, a Kaufman Hall report revealed.

The latest edition of Kaufman Hall’s National Hospital Flash Report reflected data from August 2023.

The median year-to-date operating margin index was 1.1 percent in August, increasing from 0.9 percent in July. Although margins are still below historical levels, hospitals have seen positive margins each month this year since March.

Total hospital expenses rose by 4 percent from July to August, with labor expenses growing by 1 percent and non-labor expenses increasing by 6 percent. Supply expenses (13 percent) and drug expenses (11 percent) were also up from July.

Total expenses per adjusted discharge declined by 5 percent from July, while labor expenses per adjusted discharge fell by 8 percent, suggesting less contract labor utilization.

Revenue growth outpaced expense increases, the report found. Net operating revenue was up by 8 percent month-over-month and gross operating revenue rose by 9 percent. Inpatient (4 percent) and outpatient revenue (12 percent) also increased from July to August, indicating that care is continuing to transition to the outpatient setting.

Additionally, gross and net operating revenue and inpatient and outpatient revenue were up year-over-year, the report showed.

The data suggests that patients are continuing to resume more normal care patterns, as the average length of stay was down by 4 percent in August. Discharges increased by 5 percent, adjusted patient days rose by 5 percent, and emergency department visits grew by 3 percent month-over-month. Operating room minutes were also up by 13 percent.

“This period of relative stabilization is the time for hospitals to re-engage in capital planning efforts,” Erik Swanson, senior vice president of data and analytics at Kaufman Hall, said in a press release. “Hospitals may be feeling reluctant given the last few years, but those that wait may find themselves falling behind their competitors and missing out on key opportunities.”

A recent report from Syntellis echoed these findings and shed light on physician finances as well. The data indicated that higher levels of investment are needed to support physician practices.

The median investment per physician full-time equivalent (LTE) in August was $254,362, up 6.4 percent from 2022. Total direct expenses per physician FTE rose by 6.2 percent year-over-year to $927,203.

In addition, physician practices saw revenue and productivity growth in August. Net revenue per physician FTE was $655,852 annualized, while physician work relative value units (wRVUs) was 6,150.25 annualized.