Half of hospitals will operate in the red this year, report says

Hospitals are nearing the end of the year with negative margins, with expenses, staff shortages, and fewer patient discharges driving poor performance, according to a November National Hospital Flash Report from Kaufman Hall.

Median operating margins are in the red for the tenth straight month, according to the report requested by the American Hospital Association.

Kaufman Hall's year-to-date operating margin index for hospitals was -0.5% through October. Operating margins dropped from September, down 2% from the previous month and down 13% from October 2021, the report said.

WHY THIS MATTERS

Expense pressures are the driver behind the poor performance. Hospitals' total expenses increased slightly in October from already elevated levels in September, outpacing revenues. Total expenses increased 1% from the previous month, while total labor expenses increased 3%. 

There are a few bright spots in hospital expenses, with supply and drug expenses down slightly from September 2022.

Hospitals saw modest increases in emergency department visits (3%) and operating room minutes (2%) over September figures, which contributed to a 2% increase in gross operating revenue from the previous month. The increase in ED traffic could, however, have a straining effect on an already strapped workforce as patients wait to be admitted to inpatient settings due to staff shortages.

In many instances, this has led to patients being boarded in the ED. Hospitals are struggling to discharge patients due to staffing shortages in post-acute settings. This has led to longer lengths of stay.

Adjusted discharges were down 1% from September and average length of stay increased 3%. The longer stays, however, have not resulted in additional revenue for hospitals. 

"Every aspect of patient care – from being admitted, to treatment, to discharge – is affected by the labor shortage and as we head into the virus season and potential new waves of COVID-19 the pressures on hospitals and their staff could mount," said Erik Swanson, senior vice president of data and analytics with Kaufman Hall. "The October data reinforce what we have known for several months, 2022 has been and will continue to be a very difficult financial year for the nation's hospitals."

THE LARGER TREND

The National Hospital Flash Report draws on data from more than 900 hospitals. Data from the report come from Syntellis Performance Solutions. 

Kaufman Hall also did a report specific to Texas for the Texas Medical Association.

ON THE RECORD

"Record-high expenses across the economy have not eased up, leaving hospitals in a precarious financial position as we look to the end of the year," Swanson said. "With the labor market in the healthcare sector still highly competitive, hospitals are feeling the financial pressure of needing to attract and retain workers with significant increases in salaries."

Twitter: @SusanJMorse
Email the writer: SMorse@himss.org