Hospital Margins Improved in November But Remained Negative

Hospitals’ financial performances saw slight improvements in November 2022 as expenses declined and revenue was stable, but hospital margins remained negative, according to data from Kaufman Hall.

The National Hospital Flash Report reflects financial data from over 900 hospitals. The most recent edition details hospital performance during November 2022.

Hospital margins increased by 12 percent from October to November, but operating margins were still negative at -0.2 percent.

The margin improvement was driven by decreased expenses, volume, and length of stay.

The average length of stay fell by 1 percent month-over-month, adjusted patient days declined by 2 percent, and adjusted discharges declined by 1 percent. These decreases led total expenses to fall by 1 percent between October and November.

Labor expenses also decreased, dropping by 2 percent month-over-month.

“As we’ve seen in other industries, the significant increases in labor costs have made it harder for hospitals to realize positive margins,” Erik Swanson, senior vice president of data and analytics at Kaufman Hall, said in a press release emailed to RevCycleIntelligence. “Hospitals were fortunately relieved of some financial pressure in November amid a continued competition in the healthcare labor market, potentially due to a shift away from expensive contract labor.”

Net operating revenue increased only by 1 percent, while gross operating revenue did not change in November but was up 6 percent compared to November 2021.

Similarly, outpatient revenue did not change month-over-month but was up 10 percent year-over-year. Meanwhile, inpatient revenue fell by 1 percent from October and remained flat compared to November 2021. This suggests that leaning on outpatient services could help hospitals improve their margins and overcome financial challenges.

“The November data, while mildly improved compared to October, solidifies what has been a difficult year for hospitals amidst labor shortages, supply chain issues, and rising interest rates,” added Swanson. “Hospital leaders should continue to develop their outpatient care capabilities amid ongoing industry uncertainty and transformation.”

Although the November improvements were not enough to move hospital margins out of the negatives, financial performance was better than in previous months.

In September, total expenses dropped by 1 percent from August, but the decline was not enough to offset the 4 percent decrease in operating revenue. Total expenses increased again for hospitals in October by 1 percent, while labor expenses were up by 3 percent.

2022 was one of the worst years for hospitals financially, as facilities grappled with workforce shortages and inflation. Inflation also has complicated healthcare for consumers, with many citing inflation as the top reason they are concerned about covering unexpected healthcare needs.