Dive Brief:
- Most hospitals’ finances underperformed in June compared to May under pressure from ongoing stressors like high expenses and inflation, in what appears to be the industry’s new normal, according to a report by Kaufman Hall.
- Overall, the median calendar year-to-date operating margin index for hospitals was 1.4% in June, compared to 0.7% in May. Kaufman Hall noted end-of-fiscal-year accounting adjustments likely contributed to the increase, given hospitals’ average profitability fell month-over-month from May to June.
- The findings suggest the gap is widening between affluent and struggling hospitals, the consultancy said.
Dive Insight:
Hospitals took a big hit in 2022 as persistent high labor expenses due to a competitive market and pricey temporary staff pummeled their finances.
The picture has stabilized since the spring, and the calendar year-to-date operating margin index has been in the black for four months, according to the new Kaufman Hall report. But despite the improving trend, most hospitals are still underperforming, the consultancy said.
The proportion of full-time equivalent staffers per adjusted occupied beds decreased 8% from May, which could indicate workforce reductions and staff turnover. Supply and drug expense per calendar day both increased 4% since May, while purchased services increased 5%, the report found.
Bad debt and charity care are also increasing, with a 9% spike per calendar day from May. Kaufman Hall argued that could be a side effect of ongoing Medicaid redeterminations.
While Medicaid beneficiaries were kept continuously enrolled in the safety-net program during the COVID-19 pandemic, states could begin determining whether enrollees were still eligible for coverage in April.
Around 3.8 million people have been disenrolled from the program so far. Procedural disenrollments are high, suggesting some people are being removed for paperwork reasons and could still be eligible.
“This ‘new normal’ is an incredibly challenging environment for hospitals,” Erik Swanson, senior vice president of data and analytics with Kaufman Hall, said in a statement. “It’s time for hospital and health system leaders to begin... Expanding their outpatient footprint and re-evaluating where finite resources are being utilized.”
Despite research painting a worrying picture of individual hospital finances, major hospital chains HCA Healthcare, Tenet Healthcare and UHS all recently raised their earnings outlooks for 2023 after reporting second quarter earnings.
