Kaufman Hall: Hospital Finances Beginning to Stabilize

Oct. 2, 2023
The latest “National Hospital Flash Report” from the Chicago-based Kaufman Hall consulting firm finds hospital performance stabilizing, as positive revenue margins are becoming more common

Hospital financial performance has stabilized in 2023 compared to last year, according to the latest “National Hospital Flash Report” from the Chicago-based Kaufman Hall consulting and advisory firm.

On Oct. 2, the consulting firm published a press release to its website that noted that “The median calendar year-to-date (CYTD) operating margin index for hospitals was 1.1 percent in August, up from 0.9 percent in July. Margins are still below historical levels, though positive margins are becoming more frequent in 2023. Hospital expenses rose in August, but hospitals saw enough increased revenue to offset elevated supply and drug expenses. Labor expenses declined on a volume-adjusted basis, reflecting less contract labor utilization and more overall financial stabilization. Average lengths of stay continued to decline as well in August—down 4% month-over-month—as patients continue to resume more normal patterns of accessing care,” the press release reported.

And it quoted Erik Swanson, senior vice president of data and analytics at Kaufman Hall, as stating that “This period of relative stabilization is the time for hospitals to re-engage in capital planning efforts. Hospitals may be feeling reluctant given the last few years, but those that wait may find themselves falling behind their competitors and missing out on key opportunities,” Swanson added.

The press release went on to note that “August data also show a continued emphasis on care transitioning to the outpatient setting, with outpatient revenue and inpatient revenue per calendar day increasing 12 percent and 4 percent respectively on a month-over-month basis.”

Further, the full report noted the following “key takeaways”:

1. Hospital performance in August improved compared to July as margins continue to stabilize.

While margins are still below historical levels, there is less variance and an overall trend of

positive margins in 2023.

2. Lengths of stay in 2023 continue to decline.

Patients continue to resume more normal patterns of accessing care.

3. Expenses increased but were offset by increased revenue.

Labor expenses also declined alongside less contract labor utilization, reflecting overall

financial stability.

The full report can be accessed here.