Kaufman Hall: Revenue and volume bump not enough to turn around margins for hospitals in May

While hospitals and health systems saw increases in patient volumes and revenues in May, it was not enough to overcome colossal increases in labor expenses at every level, a new report finds. 

Hospitals and systems saw a decline of 0.33% in negative operating margins in May, resulting in the fifth straight month of providers being in the red, according to consulting firm Kaufman Hall’s "National Hospital Flash Report" released Tuesday. 

“While we are seeing hospitals’ revenues inch up, it simply is not enough to mitigate the skyrocketing costs of material and labor expenses,” said Erik Swanson, Kaufman Hall’s senior vice president of data and analytics, in a statement.

Overall, hospitals and health systems saw volume increases in May as patient days increased by nearly 5% compared with April and were only down 0.5% compared with May 2021. Emergency room visits also saw a bump, increasing by 9.5% from April to May. 

“As people spend more time outdoors seasonal injuries are likely to send more patients to the local emergency room,” Swanson added. 

The spike in patient volumes helped increase gross operating revenue by 3.4% in May compared to April and up 7.6% compared to May of last year. 

Revenues for outpatient care also rose 2.2% compared to the month before and inpatient care by 3.5% month over month.

But those gains were wiped out by a continuing trend of higher expenses, which overall increased 1.1% from April and 10.7% compared to May 2021, the report said. 

“Hospitals and health systems continue to deal with the effects of inflation and a hyper-competitive labor market that is increasing wages from the registration desk to the cafeteria to the operating room,” according to a release on the report.

Labor expenses continue to surge for hospitals, following a trend across the pandemic as facilities are strained by COVID-19 cases and higher rates for contract labor. Kaufman found that labor expenses per adjusted discharge increased 1% in May from April and 13.6% for the year to date. 

The report’s data are based on a sample from more than 900 hospitals. 

Kaufman painted a murky financial picture for hospitals for the rest of this year, noting that while some volumes and revenues have ticked up, they are still well below pre-pandemic levels. 

The report comes as some hospital systems have reported losses in the first quarter of the year due in part to higher staff costs and the massive surge of COVID-19 cases fueled by the omicron variant in January.