Hospital Finances Stabilize After 6 Months of Positive Margins

Hospital finances seem to be stabilizing after years of historic losses and uncertainty.

Median hospital operating margins increased to 1.4 percent in August, according to the latest hospital financial performance data from Syntellis. This is the sixth month of positive operating margins for the 1,300 hospitals represented in Syntellis’ data, indicating a new normal for hospitals after a tumultuous couple of years during the COVID-19 pandemic and more recent worries about a recession.

“While the future remains uncertain, the fact that we now have six months of positive operating margins is a reassuring sign that hospital finances are stabilizing following more than a year of negative results,” Steve Wasson, Chief Data and Intelligence Officer at Syntellis, part of Strata Decision Technology, said in an email to RevCycleIntelligence.

“The nation’s hospitals have been on a rollercoaster the last few months. The upswing in August is especially encouraging after hospital operating margins rose rapidly in June only to decline the following month, raising concerns that the metric could sink back into the red,” Wasson continued.

Outpatient revenue is helping the bottom line. Syntellis reported that outpatient revenue rose by 10 percent last month compared to August 2022 and 11.6 percent versus July 2023. Inpatient revenue showed just a 4 percent year-over-year increase.

As outpatient revenue rose, hospitals also noticed lower-acuity hospitalizations evident by a 4 percent year-over-year decrease in average length of stay and a 3.5 percent decrease compared to July.

Combined, the revenue numbers elevated gross operating revenue to 7.8 percent year-over-year, Syntellis stated.

Hospital finances, however, are still troubled by rising expenses. The data showed increases in supply and drug expenses both on an overall and per-patient basis. In total, non-labor expenses increased 6.0 percent compared to last year as inflation continued to impact supply and drug costs.

Rising expenses also impacted physician practices, according to the financial performance data, which also drew from more than 135,000 physicians. This data revealed higher levels of investment needed to support physician practices.

The median investment per physician full-time equivalent (FTE) last month was $254,362, up 6.4 percent from 2022 and 12.1 percent from 2021. Meanwhile, total direct expense per physician FTE grew by 6.2 percent from 2022 and 11.7 percent from 2021 to $927,203 for August annualized.

Physician practices also saw increased revenues and productivity in August, with net revenue per physician FTE reaching $665,852 annualized. This is up by 10.1 percent from the previous year and 12.7 percent from 2021.

Physician productivity as measured by physician work relative value units (wRVUs) per FTE increased by 5.9 percent from 2022 and 9.2 percent from 2021. With physicians seeing more patients last month, wRVUs reached 6,150.25 annualized.