The nation’s hospitals faced a second consecutive month of negative operating margins in the wake of omicron’s worst days, according to Kaufman Hall’s latest National Hospital Flash Report.
Despite COVID-19 cases peaking in mid-January, the month of February saw reduced inpatient volumes and revenue only somewhat tempered by outpatient volume recovery and expense relief, the firm wrote.
“2022 is off to a very difficult start for our nation’s hospitals and health systems,” Erik Swanson, senior vice president of data and analytics with Kaufman Hall, said in a statement. “The metrics indicate a challenging recovery from the omicron surge in the coming months.”
The firm’s median Operating Margin Index reflecting actual margins for February landed at negative 3.45%—an improvement over January “but still well below sustainable levels,” Kaufman Hall wrote in the report.
Additionally, much of the improvement was fueled by “disproportionate increases” among a minority of hospitals rather than industrywide improvement, the firm wrote. Case in point: There was a negative 11.8% median change in operating margins from January to February, according to the report, as well as a 7.5% month-over-month decline in operating EBITDA margin.
February’s operating and operating EBITDA margins also represent negative 26.7% and negative 24.3% median changes from the same time last year, respectively, as well as negative 42.4% and 37.5% median changes from February 2020, Kaufman Hall found.
Most volume metrics were down month over month in February, with the firm noting a 13.3% drop in patient days, a 7.6% dip in adjusted patient days, a 5.3% decline in average length of stay and a 0.6% drop in adjusted discharges.
Outpatient volumes were more mixed, as some surgery patients “returned for nonurgent procedures that were delayed during the omicron surge,” the firm wrote. While operating room minutes increased 6.5% month over month, emergency department visits plummeted 17.4% from January, according to the report.
The volume troubles were coupled with revenue shortcomings as gross operating revenue dropped 7.4% from January.
Inpatient revenue was the primary culprit with a 19.3% month-over-month decline—a change Kaufman Hall said was amplified by January’s numerous COVID-19 hospitalizations and corresponding inpatient revenue. Outpatient revenue also saw a 5% dip from the previous month.
While down from last month, the firm noted that the past month’s gross operating revenue still represented a 7.8% increase over February 2021 and a 5.7% gain over February 2020 that have historically been offset by steadily rising expenses.
Hospitals did see a bit of expense relief in February 2022 thanks to falling admissions of high-acuity COVID-19 patients. Compared to the prior month, total expense per adjusted discharge dropped by 4.5%, labor expense per adjusted discharge fell by 6.1% and non-labor expense per adjusted discharge declined 3.6%, according to the report.
“Recovery from the omicron surge likely will continue to be slow in the coming months and hospitals could face additional setbacks if other variants—such as the BA.2 omicron subvariant—lead to new surges.”
Kaufman Hall’s monthly reports seek to characterize industrywide trends using data from more than 900 U.S. hospitals. These data had painted a picture of steady pandemic recovery during much of 2021 until omicron’s onset at the year’s end and in early 2022.