Hospitals nationwide saw their operating margins inch upward in August thanks to an uptick in revenue and a dip in contract labor utilization, according to the latest monthly check-in from Kaufman Hall.
The firm reported a modest increase in its median year-to-date operating margin index to 1.1%, reflecting a 2.9% median single-month index.
Though “still below historic levels,” the sector’s more consistent, generally positive margins across 2023 suggest that the erratic operating challenges of the pandemic are continuing to stabilize, Kaufman Hall wrote.
“This period of relative stabilization is the time for hospitals to re-engage in capital planning efforts,” said Erik Swanson, senior vice president of data and analytics at Kaufman Hall and the report’s author, in an accompanying release. “Hospitals may be feeling reluctant given the last few years, but those that wait may find themselves falling behind their competitors and missing out on key opportunities.”
Hospitals’ daily net operating revenue jumped 8% from July to August and 6% year over year, according to the report. Outpatient settings lead the way with a 12% month-over-month gain and 10% month-over-month increase, though inpatient revenue was also up 4% both month over month and year over year.
Bad debt and charity care metrics, which were key concerns for the firm in last month’s report, looked to have improved as well. In August, they comprised 9% less of hospitals’ total percentage of cross revenue than in July.
The revenue improvements came alongside a bump in volumes. Daily discharges and adjusted discharges were up 5% and 9%, respectively, compared to July, when hospitals had logged a pullback in patient activity.
Of particular interest for Kaufman Hall was a 4% month-over-month and month-over-month decline in average length of stay that came “as patients continue to resume more normal patterns of accessing care,” Swanson wrote.
On the other side of the equation was a 4% month-over-month increase in daily total expense that, thanks to the higher volumes and reduced stays, translated to a 5% month-over-month decline in total expense per adjusted discharge. Much of the month’s savings came on the labor side, Kaufman Hall added, as less contract labor utilization drove an 8% month-over-month decline in labor expense per adjusted discharge.
Stabilizing labor and margins should give hospitals enough breathing room to turn their attention toward strategic efforts that may have fallen by the wayside, Swanson wrote in the report.
“While deferring capital investment may have been prudent in the face of recent financial pressures, waiting too long to re-engage in a strategic financial and capital planning process could threaten the long-term relevance and viability of organizations as they fall behind the needs of their communities and actions of their competitors,” he wrote.
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.
A separate analysis of August’s numbers released by the latter reached a similar conclusion of healing finances across the hospital sector.
“While the future remains uncertain, the fact that we now have six [consecutive] months of positive operating margins is a reassuring sign that hospital finances are stabilizing following more than a year of negative results,” Steve Wasson, chief data and intelligence officer at Syntellis, said in an emailed statement.