The second calendar year of the pandemic was kinder to hospitals than the first, although the industry is “still performing well below 2019” in regard to margins and volumes, according to the latest monthly report from Kaufman Hall.
Hospitals’ median change in operating margin for the full year of 2021 (without CARES Act relief) rose 44.8% compared to 2020, but still remain 3.8% below margins from the entirety of 2019, the firm wrote.
Patients seeking care during the past year also required longer hospital stays, with full-year adjusted discharges for the industry up 6.9% over 2020, adjusted patient days up 11.8%, average lengths of stay up 3.5%, operating room minutes up 8.3% and emergency department visits up 10.9%.
Comparing full-year volume metrics to 2019, on the other hand, showed a 5.6% decline in adjusted discharges, an 8% dip in emergency department visits and a 3% drop in operating room minutes.
Hospitals’ gross operating revenue for 2021 was up 14.7% compared to 2020 as well as 12.1% from 2019, with gains present across inpatient and outpatient revenues alike, according to the report.
However, the greater inflow of funds was offset by steadily increasing workforce shortages and supply costs, the firm wrote. Labor expense per adjusted discharge rose 4.6% percent from 2020 to 2021 but has jumped 19.1% since 2019. Non-labor expense per adjusted discharge during 2021 showed a 2.1% increase from 2020 and a 19.9% rise since 2019.
As the year reached its close, hospitals were seeing volumes, revenues and expenses all on the upswing due to the increasing spread of the omicron wave.
From November 2021 to December 2021, spiking cases drove a 98.3% increase in month-over-month COVID-related hospitalizations, according to the firm’s report.
More broadly, December saw increases across hospitals’ adjusted discharges (5.5%), adjusted patient days (3.9%) and emergency department visits (7.3%) over the prior month, yet “a flat month for [operating room] minutes suggests that many providers and non-COVID patients may have canceled care due to rising COVID caseloads—a trend that has been seen in previous waves of the pandemic,” the firm wrote.
Revenues saw their tenth consecutive month of year-to-date and year-over-year increases, according to the report. Gross operating revenue without relief funding rose 4.4% versus November, while inpatient revenue and outpatient revenue increased 6.2% and 2.9%, respectively.
Expense growth continued to weigh down hospitals’ margins in December, albeit not at pace with volumes. While total expenses rose 3.7% and total labor expense increased 2.8%, adjusted discharges actually dipped 1.8% from November.
The bottom-line result, according to the report, was a median 38% increase in operating margin from November to December without CARES Act aid and a 49.5% change with the relief funds.
"As we enter the third year of the pandemic, hospital and health system leaders face worsening labor shortages that are driving up costs across healthcare,” Erik Swanson, senior vice president of data and analytics with Kaufman Hall, said in a statement. “Organizations are having to pay high salaries to attract the workforce they need, while also paying more for drugs and other supplies. Managing through these challenges will require organizations to build new levels of agility and efficiencies.”
Kaufman Hall’s monthly reports incorporate data from more than 900 U.S. hospitals.