Hospitals’ operating margins and volumes held steady in October and remain elevated over what the sector faced through much of the pandemic, according to Kaufman Hall’s latest monthly report.
The consulting firm’s year-to-date hospital operating margin index remained at 1.2%, while the single-month operating margin index returned to 3.3% after a stumble back in September.
Many organizations are taking advantage of their steady base to head off any future financial stumbles, the firm added.
“Hospitals are continuing to experience financial stabilization and are increasingly adopting strategies to build resilience and minimize vulnerability,” Erik Swanson, senior vice president of data and analytics at Kaufman Hall and author of the firm’s monthly reports, said in a statement. “Key strategies include investing in technology, strengthening relationships with post-acute providers, expanding outpatient footprints and deploying workforce optimization techniques.”
Hospitals’ daily discharges and adjusted discharges were flat from September to October, but rose 5% and 8%, respectively, over October 2022, according to the report.
Kaufman Hall called out monthly declines in emergency department visits (-2%) and observation patient days (-2%), the former of which “likely reflects the shift in patient behavior to outpatient care,” while the latter “could be attributed to patient type but also likely reflects increased vigilance of these patients, including the deployment of case managers and use of observation units.”
Still, hospitals’ daily net operating revenue rose by 2% from September to October, and 9% year over year. The revenue gains were consistent across inpatient and outpatient sources, per the report, and were accompanied by a 2% month-over-month decline in hospitals’ daily bad debt and charity.
Total expenses, meanwhile, stayed flat month to month but are up 5% year over year, the firm found.
While hospitals’ labor expenses held firm, the sector saw month-over-month increases in supply expense per adjusted discharge (4%) and drug expense per adjusted discharge (3%) but a decline in purchased service expense per adjusted discharge (-3%). Compared to October of last year, per adjusted discharge labor and purchased service spending is down while per adjusted discharge supply and drug expenses are up.
Kaufman Hall’s monthly reports incorporate information from more than 1,300 U.S. hospitals, the data from which are collected by Syntellis Performance Solutions (previously Kaufman Hall Software, now part of Strata Decision Technology). A separate report on the data from the performance management group highlighted October as the sixth consecutive month of year-over-year revenue gains and consistent volume recovery.
Earlier this month Syntellis released a report alongside the American Hospital Association that highlighted a 28% drop in health systems’ median days of cash on hand from January 2022 (173 days) to June 2023 (124 days) among hospitals included in the dataset.