Hospitals’ margins and revenues took a slight dip in March, though it wasn’t enough to sour what has been a strong quarter for the sector.
Per Kaufman Hall’s most recent monthly report, the group’s single-month operating margin index landed at 3.4% for March, down slightly from February’s 3.6%.
The calendar year to date operating margin index was 3.9% in March, which is still well above the 1.9% that closed out 2023.
The dip was accompanied by a month-over-month decline in volumes and revenues. For the former, daily discharges and adjusted discharges dipped by 2% and 3%, respectively, as daily ED visits declined by 2% and daily operating room minutes fell by 6%.
The lower revenues were particularly felt in the outpatient setting, Kaufman Hall wrote. Whereas daily net operating revenue declined by 4% from February to March, daily outpatient revenue dropped by 5%, which the consulting group warned could reflect “the competitive challenges” of outpatient care delivery.
“Declines in outpatient revenue mean hospitals providing outpatient care may face difficulties ahead,” said Erik Swanson, a senior vice president with Kaufman Hall, in a statement. “Organizations may need to reevaluate their assets and consider strategic partnerships to offset current and future challenges with volume.”
Hospitals did find some relief on their expenses, though the changes largely reflected the lowered volumes. Daily total expense dropped 4% from February with most of the savings coming from non-labor expenses, yet hospitals’ total expense per adjusted discharge fell by just 1% and was outpaced by a 2% decline in net patient service revenue per adjusted discharge.
Kaufman Hall also flagged hospitals’ persistent, but declining, increases in incurred bad debt and charity as well as their higher accounts receivable balances as “challenges and opportunities” for revenue cycle teams.
Still, the glum March numbers land within what has largely been a strong quarter for the hospital sector.
Kaufman Hall’s report outlined substantial year-to-date increases across nearly all revenue and volume metrics. Another report released last week by Strata Decision Technology—which owns the Strata Decision Technology data stream from which Kaufman Hall builds its own analyses—showed year-to-date national medial operating margins that were more than double 2023’s close despite a similar slight decline in March’s operating margin.
The trend was also apparent throughout the past week’s earnings calls, when the country’s major for-profit hospital chains like HCA Healthcare and Tenet Healthcare uniformly described increases in their year-over-year revenues and volumes.