Hospitals’ financials dipped in September as volumes dipped “across the board” and labor expenses inched upward, according to Kaufman Hall’s monthly sector report.
The healthcare consulting firm’s single-month index of over 1,300 hospitals’ operating margins dropped from 3.5% in August to 1% in September. Hospitals’ year-to-date operating margin index “paradoxically” rose from 1.2% to 1.4%, which was attributed to “the historical variation in performance of hospitals across 2023.”
Driving the stumble were month-over-month declines in daily discharges (-3%), daily adjusted discharges (-4%) and daily operating room minutes (-7%), according to the report. Daily adjusted patient days also declined (-2%) while daily emergency department visits stayed flat and average length of stay rose slightly (1%).
These September trends took a bite out of hospitals’ revenue metrics. Daily net operating revenue and gross operating revenue respectively dropped by 2% and 4% month over month. The declines came across hospitals’ daily inpatient (-1%) and outpatient (-5%) revenue numbers.
The volume declines kept total expenses flat compared to August, though expenses per adjusted discharge were up 3% month over month. That rise was a result of elevated workforce spending, with daily labor expenses up 1% and labor expenses per adjusted discharge up 4%, Kaufman Hall found.
“While overall expenses seem to be softening as volume decreases, labor costs continue to be a challenge for hospitals and health systems,” Erik Swanson, senior vice president of data and analytics at Kaufman Hall, said in a release. “Hospitals and health systems need to identify long-term solutions that can address persistent workforce issues.”
Hospitals did find some spending relief among daily supply (-5% month over month) and drug expenses (-2% month over month), though daily purchased service expenses were up from August (3%) and last September (5%) alike.
Despite the tough month for volumes, Kaufman Hall noted that the numbers “are still an improvement over 2022." Compared to September of that year, daily adjusted discharges are up 4% and ED visits are 1% higher.
On the other hand, hospitals are still dealing with an uptick in bad debt and charity. Though down 5% on a daily basis from August, the spending on uncompensated care remains up 8% from the year prior.
“This is partly attributed to the ongoing Medicaid redetermination process, which has resulted in at least 9.5 million people disenrolled,” according to the report.
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.
Based on the trends outlined in the report, the firm recommended hospitals create flexible staffing pools, look into advanced predictive demand modeling to appropriately prepare staffing levels and “focus on key strategic relationships with group purchasing organizations, distributors, and wholesalers to improve pricing efficiency and supply consistency.”