In July 2023, hospitals experienced deteriorating financial performance with lower patient volumes, revenue, and operating margins. The National Hospital Flash Report revealed a 1.3% average operating margin index, down from June’s 1.4%. Outpatient volumes fell more than inpatient ones, potentially due to reduced elective procedures. Expenses decreased, but not enough to offset revenue losses. Ongoing Medicaid reviews led to disenrollments, increasing bad debt, and charity care. Syntellis’ report echoed findings, showing declining median operating margins and rising expenses.
In July 2023, the financial performance of hospitals experienced a decline, as indicated by data from Kaufman Hall. Patient volumes, revenue, and operating margins all faced a decrease during this period.
According to the most recent National Hospital Flash Report, the average operating margin index for July stood at 1.3 percent, showing a drop from the 1.4 percent recorded in June. However, there was a notable increase of 20 percent in operating margins when compared to the same month of the previous year, July 2022.
The report highlighted that outpatient volumes experienced a more significant decline compared to inpatient volumes. This trend could be attributed to a reduced number of patients seeking elective procedures during the summer months. The data showed a 7 percent decrease in adjusted discharges per calendar day from June, and adjusted patient days per calendar day fell by 5 percent.
Emergency department visits per calendar day decreased by 1 percent from June, while operating room minutes per calendar day saw a substantial decline of 13 percent on a month-over-month basis.
The decrease in patient volumes led to reduced expenses. Total expenses per day fell by 4 percent from June to July. Labor expenses per day experienced a 1 percent drop, and non-labor expenses saw a decline of 7 percent. Nevertheless, expenses were higher compared to July 2022.
Despite the reduction in expenses, the decrease wasn’t sufficient to counter the revenue losses in July. Net operating revenue per day experienced a decline of 9 percent month-over-month, and gross operating revenue per day saw a 6 percent decrease. Both inpatient revenue (-3 percent) and outpatient revenue (-8 percent) faced a decline compared to June.
The report pointed out that ongoing Medicaid redeterminations resulted in significant disenrollments, contributing to an increase in bad debt and charity care for hospitals.
A report from Syntellis echoed similar findings regarding hospitals’ financial performance in July. According to Syntellis’ data, the median operating margin dropped from 2 percent in June to 1.1 percent in July. The median change in operating margin stood at -4.7 percent month-over-month, and the change in operating EBITDA margin was recorded at -4.3 percent.
In a year-over-year comparison, total hospital expenses exhibited an increase. Total non-labor expenses saw a rise of 5.5 percent from July 2022, total labor expenses increased by 2.1 percent, and overall expenses grew by 3.6 percent.
Compared to July 2022, there was a slight decline of 0.6 percent in adjusted patient days, a 0.4 percent decrease in emergency department visits, and an increase of 0.8 percent in operating room minutes. On a month-over-month basis, adjusted patient days experienced a decline of 2 percent, emergency department visits grew by 1.8 percent, and operating room minutes dropped by 9.7 percent, as outlined in the report.
While hospital revenues saw a decrease from June, they showed an improvement compared to the previous year. Gross operating revenue increased by 7.5 percent from July 2022, inpatient revenue rose by 4.7 percent, and outpatient revenue exhibited growth of 9.1 percent.
The Syntellis report also delved into the financial performance of physician practices. The median investment per physician full-time equivalent (FTE) reached $274,407 on an annualized basis for July, marking a 3.7 percent increase from 2022. The annualized total direct expense per physician FTE grew by 5.9 percent from 2022, reaching $973,218.
In comparison to July 2022, physician productivity measured in work relative value units (wRVUs) per FTE increased by 3.2 percent. Net revenue per physician FTE experienced a year-over-year rise of 9.1 percent. Staffing levels showed a decline from the previous year, with support staff FTEs per 10,000 wRVUs falling by 1.6 percent.
