Kaufman Hall: Consumers may again be avoiding getting care as hospital margins remain depressed

Hospital volumes softened in November overall as operating margins remain depressed, signaling that once again consumers could be delaying or avoiding care due to the pandemic, a new report from consulting firm Kaufman Hall found.

The firm released Tuesday its latest hospital flash report detailing revenues and volumes for November before the omicron-fueled surge of COVID-19 took hold. The report found hospitals are still facing major pressures from rising expenses and labor shortages.

“Hospitals are grappling with higher labor costs despite lower staffing levels, due to intense competition for qualified healthcare workers,” said Erik Swanson, Kaufman’s senior vice president of data and analytics, in a statement. “In addition, the highly contagious omicron variant could put more pressure on hospitals in the months to come.”

Kaufman found that hospital volumes softened in November, with discharges dropping nearly 5% and adjusted discharges by 3.9% compared to the month before. Discharges were also down 6.1% compared with pre-pandemic levels.

Meanwhile, the average length of stay at hospitals increased by 0.8% compared to October and 8.6% compared with November 2019.

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The report estimates consumers could be postponing non-COVID-19 care.  

“The potential impact of the omicron variant in future months may influence this trend further,” Kaufman’s analysis said.

The volume fluctuation helped contribute to a month-to-month decline in total revenues. The report found gross operating revenues that did not includes CARES Act relief funding declined 0.6% from October to November.

Inpatient revenue dropped down to 2.6%, and outpatient revenue was only down by 0.7%.

However, net patient service revenue per adjusted discharge rose 2.5% thanks in part to payments for higher acuity patients.

Expenses continued to be a drain on hospital operating margins.

“Total expense per adjusted discharge increased 24.7%, labor expense per adjusted discharge rose 26.4%,” the report said.

Labor expenses were particularly vexing for hospitals; even though expenses rose 2.7% month to month, there was a 1% decline in full-time equivalent staff per adjusted occupied bed.

“Hospitals in the west had the biggest increase in labor expenses for the month, with labor expense per adjusted discharge up 28.8% [year-over-year],” Kaufman Hall added.

The flash report relies on data from more than 900 hospitals across the country.