June’s modest volume and expense improvements were not enough to pull the hospital industry’s median operating margin into the green, marking six straight months of negative operations across the country, according to a new industry report.
Hospitals and health systems saw a median 30.8% improvement in their operating margins from May to June, leading to a median year-to-date operating margin index of -0.09%, according to Kaufman Hall’s numbers through June.
Despite the upward trend, the firm wrote that the industry still lags well behind the midpoint of 2021, is “nowhere near pre-pandemic levels” and “will likely end up with historically low margins for the remainder of the year.”
From May to June, the country’s hospitals saw a 1.8% increase in adjusted discharges alongside a decrease in acuity, represented by a 0.6% decline in adjusted patient days and a 2.1% fall in average length of stay, according to the report. All three of those measures are up compared to June of last year.
Operating room minutes grew 2.4% from May but remain 4.8% below June 2022, according to the report. Emergency department visits, meanwhile, fell 2.6% month over month but are up 2.6% year over year.
These volumes drove a 1.2% increase in gross operating revenue from May to June, the firm wrote. June’s numbers also represent a 4.1% increase from June 2021 and a 6.2% gain from the top of 2022 when the omicron wave began settling on hospitals.
Outpatient revenue carried the overall gain with a 2.6% month-over-month increase, a 4.7% year-over-year increase and a 7.8% year-to-date increase, according to the report. Inpatient revenue dipped 0.9% from May to June but was still up 2.2% year over year and 4.6% year to date.
June saw some relief from the year’s “historic high” expenses—particularly on the labor front—but still weighed heavily enough on revenues to keep hospitals in a tight spot.
Total expenses were down 1.3% from May to June but remain up 7.5% from last year and 9.5% higher than the beginning of the year, according to the report. Total expense per adjusted discharge also fell 3.6% from May while still up 6.1% year over year.
Total labor expenses fell 2.4% from May yet remain 12.1% higher than in June 2021. Labor expense per adjusted discharge decreased 6.7% month over month but is still up 9.1% from last year and 13.4% year to date.
“To say that 2022 has challenged healthcare providers is an understatement,” Erik Swanson, senior vice president of data and analytics with Kaufman Hall, said in a statement. “It’s unlikely that hospitals and health systems can undo the damage caused by the COVID waves of earlier this year, especially with material and labor costs at record highs this summer.”
Kaufman Hall’s monthly reports are based on a sample of more than 900 nationally representative hospitals.
The trends fall in line with recent comments from major health system executives who this past week painted a similar picture of slow recovery through the year’s second quarter.
Among the harder hit was Community Health Systems, which reported its second consecutive red quarter due to a blend of less-than-expected non-COVID volumes, persistently high labor pressures and lower per-admission revenues.