Hospitals experience modest margin gains in November 2022

Press releases may be edited for formatting or style | January 04, 2023 Business Affairs
Hospitals experienced a slight increase in operating margins in November—though margins remained negative for 2022 to date—according to the latest National Hospital Flash Report from Kaufman Hall. Lower expenses and increased outpatient revenue drove improved month-over-month performance.

Median Operating Margin Improves Month-Over-Month
Hospitals experienced improved margins in November, up 12% from the previous month. The median Kaufman Hall Year-To-Date Operating Margin Index reflecting actual margins was -0.2% in November.

Less Expenses Drive Improved Margins
A decrease in volume and shorter lengths of stay contributed to a 1% decrease in total expenses in November. While the slowdown led to less revenue, hospital expenses declined in November, resulting in improved margins. Labor expenses, a significant driver of healthcare costs, also decreased by 2% in November.

“As we’ve seen in other industries, the significant increases in labor costs have made it harder for hospitals to realize positive margins,” said Erik Swanson, senior vice president of Data and Analytics with Kaufman Hall. “Hospitals were fortunately relieved of some financial pressure in November amid a continued competition in the healthcare labor market, potentially due to a shift away from expensive contract labor.”

Hospital Outpatient Services a Bright Spot for Revenue in 2022
Hospital outpatient revenue increased 10% year-over-year, while inpatient revenue was flat over the same time period. While inpatient services continue to hamper margins, hospitals can lean on outpatient services to address challenges.

“The November data, while mildly improved compared to October, solidifies what has been a difficult year for hospitals amidst labor shortages, supply chain issues, and rising interest rates,” said Swanson. “Hospital leaders should continue to develop their outpatient care capabilities amid ongoing industry uncertainty and transformation.”

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

About Kaufman Hall
Kaufman Hall provides management consulting solutions to help society’s foundational institutions realize sustained success amid changing market conditions. Since 1985, Kaufman Hall has been a trusted advisor to boards and executive management teams, helping them incorporate proven methods, rigorous analytics, and industry-leading solutions into their st rategic planning and financial management processes, with a focus on achieving their most challenging goals.

Kaufman Hall services use a rigorous, disciplined, and structured approach that is based on the principles of corporate finance. The breadth and integration of Kaufman Hall advisory services are unparalleled, encompassing strategy; financial and capital planning; performance improvement; treasury and capital markets management; mergers, acquisitions, partnerships, and joint ventures; and real estate.

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