Hospitals exhibited resilient financial recovery in October, surpassing pandemic-era margins. Stabilized metrics, and strategies emphasizing technology, outpatient services, and workforce optimization denote a positive trend. While labor expenses reduce, non-labor costs remain steady, underlining sustained fiscal growth. Patient-centric measures are vital for strengthening relationships and enhancing hospital performance.
In October, hospitals demonstrated robust financial resilience, surpassing the margins observed during the peak of the pandemic. The latest findings from the “National Hospital Flash Report” by Kaufman Hall indicate a notable improvement in hospital performance, showcasing a trajectory of ongoing stabilization following the challenges posed by the COVID-19 crisis.
The report analyzes financial data from over 1,300 hospitals provided by Syntellis Performance Solutions. It reveals a median calendar year-to-date operating margin index of 1.2 percent in October, remaining consistent with this figure since August 2023.
Previously, the median calendar year-to-date operating margin index reached its apex in June at 1.5 percent, dropping to 1.0 percent in July. However, the recent steadiness in these metrics underscores the financial resilience hospitals have achieved. Notably, the current operating margins surpass those observed during the pandemic’s peak, signaling a positive upward trend, as highlighted in the report.
Stabilized Metrics and Strategic Initiatives Drive Hospital Financial Recovery
Erik Swanson, Senior Vice President of Data and Analytics at Kaufman Hall, emphasized the hospitals’ continued financial stabilization. He noted that these institutions are proactively adopting strategies aimed at enhancing resilience and reducing vulnerability. These strategies encompass technological investments, bolstering partnerships with post-acute care providers, expanding outpatient services, and implementing workforce optimization techniques.
Challenges in workforce management have persistently affected hospitals, health systems, and physician practices since the height of the pandemic in 2020. The financial burden stemming from escalated labor expenses remains a significant concern. While recent quarterly earnings suggest a decline in reliance on contract labor to bridge workforce gaps, hospitals are still grappling with recovering from the elevated costs incurred by utilizing travel nurses and other temporary clinicians.
The national data indicates that labor expenses per adjusted discharge remained unchanged from September, reflecting a 5 percent decline year-over-year and a 6 percent decrease year-to-date compared to the previous year. In contrast, non-labor expenses per adjusted discharge witnessed a 1 percent increase in October. This figure remained consistent with both the previous year and the corresponding period in 2020. However, year-to-date data demonstrated a 2 percent reduction compared to the previous year.
Throughout October, hospital volumes remained relatively steady. There was minimal change in discharges per calendar day, adjusted discharges per calendar day, and average length of stay compared to September. Yet, discharges per calendar day surged by 5 percent year-over-year and by 3 percent year-to-date compared to 2020.
The trend of transitioning to outpatient care persisted, evident in a 2 percent decline in emergency department visits from the previous month. This shift has been ongoing since the pandemic’s onset, underscoring the necessity to fortify provider networks and outpatient services, as highlighted in the report.
Moreover, there was a decline in observation patient days in October, potentially attributed to changes in patient demographics and increased oversight via case management and observation unit utilization.
The report emphasizes incorporating patient-centric measures, such as analyzing the cost of care, to fortify patient relationships. These measures aim to enhance patient satisfaction, improve accessibility, and refine marketing strategies. Additionally, tracking the corresponding return on investment is advised as part of these initiatives.
Overall, Hospitals must persist in adopting patient-focused measures and consumer-oriented healthcare strategies. Strengthening patient relationships through cost-of-care assessments is imperative for improved satisfaction and accessibility. The consistent margin recovery, steady reduction in labor expenses, and sustained stability in non-labor costs demonstrate hospitals’ resilience. Embracing technology, expanding outpatient services, and optimizing the workforce remains crucial for continued financial growth and long-term stability.