Hospital margins climb to 5.1% in September

Photo: Emir Memedovski/Getty Images

Hospital operating margins inched upward for a second consecutive month, with new data from Strata showing the median year-to-date (YTD) operating margin for hospitals nationwide rose to 5.1% in September, up from 4.9% in August and 4.8% in July.

U.S. health systems didn't fare as well, seeing operating margins drop for a third consecutive month in September. The median YTD health system operating margin was 1.6% in September, down from 1.9% in August and down from a 12-month high of 2.3% in May and June.

In examining how hospital margins have changed over time, the median change in hospital operating margin rose 2.1 percentage points from September 2023 to September 2024, and decreased just 0.1 percentage point from August to September of this year. For hospitals in different regions, the median change in operating margin ranged from increases of 1.1% for those in the Northeast/Mid-Atlantic to 3.9% for hospitals in both the West and Great Plains.

The median change in operating earnings before interest, taxes, depreciation and amortization (EBITDA) margin for hospitals nationwide rose 1.8 percentage point year-over-year (YOY) and decreased 0.2 percentage point month-over-month.

WHAT'S THE IMPACT?

Gross hospital revenues saw sizable YOY increases in September, numbers showed, but were down compared to August. Outpatient revenue had the biggest YOY jump at 9.1%. Inpatient revenue rose 6.4% YOY and gross operating revenue increased 8.7% YOY.

Month-over-month, outpatient revenue dropped 4.8%, inpatient revenue was down 3.2%, and gross operating revenue decreased 4.2%.

Revenues increased after being adjusted for patient volumes. Net patient service revenue (NPSR) per adjusted discharge rose both YOY and month-over-month at 4.2% and 2.1%, respectively. NPSR per adjusted patient day was up 5.5% YOY and 0.4% from August to September 2024.

As far as expenses, hospitals continued to see YOY increases, though expenses were down as compared to the previous month. Total non-labor expense had the biggest YOY increase, at 6.3%, driven by an 8.8% YOY rise in purchased services expense, an 8.6% YOY increase in supply expense and a 6.8% rise in drugs expense. Total labor expense was up 5.2%, and total expense increased 5.9% from September 2023 to September 2024.

Hospitals saw some relief month-over-month. Total expense decreased 2.2%, total labor expense was down 2.3%, and total non-labor expense decreased 2% from August to September.

THE LARGER TREND

Patient demand was mixed in September, decreasing across key metrics month-over-month, but increasing for both inpatient and outpatient volumes YOY. Outpatient visits had the biggest increase from September 2023 to September 2024, at 3.8%, while inpatient admissions rose 2.7% over the same period. Observation visits decreased 3.6%, and emergency visits were down 0.6% YOY.

From August to September, outpatient visits decreased 6.4% and inpatient admissions were down 5.7%. Compared to two years ago in September 2022, inpatient admissions were up 7% and outpatient visits increased 3%.

Jeff Lagasse is editor of Healthcare Finance News.
Email: jlagasse@himss.org
Healthcare Finance News is a HIMSS Media publication.