Dive Brief:
- Hospitals’ financial performance continued to recover in October after operational challenges brought on by the COVID-19 pandemic stabilized, according to a new report from Kaufman Hall.
- The overall year-to-date operating margin index for hospitals was 1.2% in October, the same percentage recorded in August and September.
- Hospitals are working to build resilience by investing in new technologies, building relationships with post-acute providers, expanding outpatient services and optimizing their workforce, according to a statement from Erik Swanson, senior vice president of data and analytics at Kaufman Hall.
Dive Insight:
Many hospitals struggled financially in the wake of the pandemic as expenses, especially labor costs, soared and facilities relied on expensive temporary staff.
But margins have begun to improve this year, with Kaufman’s operating margin index for the calendar year to date staying in the black since March. The metric reached -0.9% in February this year.
Hospital operators have reported improving margins, with systems like the Mayo Clinic reporting a net income for three consecutive quarters this year after posting flagging profits in 2022. Kaiser Permanente reported $239 million in profit in the third quarter this year, after posting a $1.5 billion loss during the same period last year.
However, some facilities are still facing financial challenges. This summer, the consultancy warned that many hospitals are under pressure from high expenses and inflation, and that the gap between rich and poor hospitals is widening.
Nonprofit hospitals are expected to continue to manage weak margins through next year and margin improvements won’t yet represent a full rebound, according to a July report from Fitch Ratings. Though nonprofits’ outlook is now stable, expenses are staying high and hospitals will need to focus on cost control, credit ratings agency Moody’s Investors Services said this month.
The nation’s largest for-profit hospital operators largely reported lower profits in the third quarter this year, despite strong demand for services.
