The nation’s hospitals started the year well in the red as the omicron wave’s peak muffled high-profit care services and fueled even higher expenses, according to Kaufman Hall's monthly industry report.
“The first month of 2022 was devastating for hospitals and health systems nationwide as they were hit full force by the omicron tidal wave,” the firm wrote in its report. “Hospital margins declined dramatically as many providers temporarily halted non-urgent procedures, the numbers of inpatients requiring longer hospital stays rose and expenses continued to climb due to widespread staffing and supply chain issues.”
As U.S. COVID-19 cases reached their all-time high, Kaufman Hall’s operating margin index for the month came in at negative 3.68% without CARES funding and negative 3.3% with the federal relief.
The firm also saw a median change of negative 71.3% in hospitals’ operating margins from December excluding CARES funding. Median changes from January 2021 and January 2020 were negative 23.7% and negative 73.3%, respectively.
Reversing months of gradual volume recovery, the firm saw a 10.4% month-over-month drop in adjusted discharges, a 15.7% month-over-month decline in operating room minutes and a 1.4% month-over-month drop in emergency department visits. Conversely, patient days increased 1.7% month over month, reflecting the greater number of patients requiring longer stays due to severe COVID-19 infection.
These trends led to a combination of reduced revenues and escalating expenses, Kaufman Hall wrote.
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Although still higher than in January 2021, outpatient revenue and gross operating revenue (minus CARES) fell 7.5% and 4.7%, respectively, month over month. Inpatient revenue increased 2.7%.
Hospitals’ total expense per adjusted discharge leaped 11.6% from December 2021 to January 2022. The firm primarily attributed this to a 14.6% month-over-month rise in labor expense per adjusted discharge—although an accompanying 7.8% increase in non-labor expense per adjusted discharge also wasn’t anything to sneeze at.
Looking to previous years, the month’s total expense per adjusted discharge reflected a 10.9% increase over that of January 2021 and a 43.5% increase over the pre-pandemic January 2020, the firm wrote. These pressures “show no signs of subsiding” thanks to nationwide labor shortages and supply chain challenges.
Still, Kaufman Hall noted new COVID-19 cases and hospitalizations plummeted “nearly as quickly as they had gone up” during the second half of January, an encouraging sign that hospital performance “will likely stabilize somewhat” during the months to come.
“Our nation’s hospitals and health systems had a very difficult month to start the year,” Erik Swanson, senior vice president of data and analytics with Kaufman Hall, said in a statement. “While COVID-19 cases have swiftly declined since peaking in mid-January, the effects of the sudden and sizable margin and outpatient volume declines will be felt throughout 2022.”
Many hospitals and health systems were already tightening their belts going into the new year amid the worst of the omicron variant.
In a full-year report released last month, Kaufman Hall warned that steady recovery could be impacted by volume, revenue and expenses all driven by the worsening omicron wave. A recent spate of quarterly earnings reports for the period ended Dec. 31, 2021, also saw several organizations like Trinity, Ascension and CommonSpirit reporting slim or even negative operating margins.