Hospital Financial Performance Continued Downward Trend in July

Hospital financial performance worsened in July 2023, with patient volumes, revenue, and operating margins falling, data from Kaufman Hall revealed.

The most recent edition of the National Hospital Flash Report found that the average operating margin index was 1.3 percent in July, down from 1.4 percent in June. However, compared to July 2022, operating margins were up by 20 percent.

Outpatient volumes fell slightly more than inpatient volumes, the report noted, perhaps due to fewer patients seeking elective procedures in the summer. Adjusted discharges per calendar day decreased 7 percent from June, while adjusted patient days per calendar day fell 5 percent.

Emergency department visits per calendar day were down 1 percent from June and operating room minutes per calendar day declined by 13 percent month-over-month.

The lower patient volumes led to decreased expenses, with total expenses per day falling by 4 percent from June to July. Labor expenses per day dropped 1 percent and non-labor expenses decreased 7 percent. However, expenses were up compared to July 2022.

Additionally, the decline in expenses was not enough to offset revenue losses in July. Net operating revenue per day fell by 9 percent month-over-over and gross operating revenue per day declined by 6 percent. Inpatient revenue (-3 percent) and outpatient revenue (-8 percent) were both down from June.

Ongoing Medicaid redeterminations have led to significant disenrollments, resulting in an increase in bad debt and charity care for hospitals, the report indicated.

A report from Syntellis shared similar findings about hospitals’ finances in July. According to Syntellis’ data, the median operating margin fell from 2 percent in June to 1.1 percent in July. The median change in operating margin was -4.7 percent month-over-month and the change in operating EBITDA margin was -4.3 percent.

Year-over-year, total hospital expenses increased. Total non-labor expenses were up by 5.5 percent from July 2022, total labor expenses were up 2.1 percent, and total expenses increased by 3.6 percent.

Compared to July 2022, adjusted patient days were down by 0.6 percent, emergency department visits declined by 0.4 percent, and operating room minutes were up by 0.8 percent. Month-over-month, adjusted patient days fell by 2 percent, emergency department visits increased by 1.8 percent, and operating room minutes declined by 9.7 percent, according to the report.

While hospital revenues decreased from June, they were up from last year. Gross operating revenue increased by 7.5 percent from July 2022, inpatient revenue rose by 4.7 percent, and outpatient revenue grew by 9.1 percent.

The Syntellis report also looked at physician practices and their recent financial performances. The median investment per physician full-time equivalent (FTE) was $274,407 for July annualized, up 3.7 percent from 2022. The annualized total direct expense per physician FTE increased by 5.9 percent from 2022 to $973,218.

Compared to July 2022, physician productivity, measured in work relative value units (wRVUs) per FTE, increased by 3.2 percent. Net revenue per physician FTE rose by 9.1 percent year-over-year. Staffing levels were down from last year, with support staff FTEs per 10,000 wRVUs falling 1.6 percent.