Kaufman Hall: Hospital Margins Seen Stabilizing

Dec. 1, 2023
The latest “National Hospital Flash Report” from Kaufman Hall points to further stabilization of hospital operating margins, with volumes holding steady

Hospitals’ financial performance in October improved compared to the previous month, according to the latest National Hospital Flash Report” from the Chicago-based Kaufman Hall consulting and advisory firm, a press release posted to the firm’s website on Nov. 28 stated. “Margins are above pandemic levels and volumes held steady.”

The report noted that “Hospital performance in October reflects continued stabilization with margins above pandemic levels and volumes holding steady. The median Kaufman Hall Calendar Year-To-Date Operating Margin Index reflecting actual margins was 1.2 percent in October.”

And it quoted Erik Swanson, senior vice president of data and analytics, as noting that “Hospitals are continuing to experience financial stabilization and are increasingly adopting strategies to build resilience and minimize vulnerability. Key strategies include investing in technology, strengthening relationships with post-acute providers, expanding outpatient footprints, and deploying workforce optimization techniques.”

Key takeaways this month:

1. Hospital performance in October reflects continued stabilization. Operating margins are elevated over pandemic levels and revenue continue to show improvement compared to the previous month.

2. Emergency department visits declined compared to the previous month. This likely reflects the shift in patient behavior to outpatient care. Organizations need to continue to build strong provider and outpatient networks.

3. This month there was a decrease in observation patient days. This could be attributed to patient type but also likely reflects increased vigilance of these patients, including the deployment of case managers and use of observation units.

Further, the firm urged hospital-based organization leaders to take the following action steps:

“Hospitals and health systems need to think like consumer[1]facing organizations and better quantify the impact their relationship with consumers has on their business model.

• Hospitals need to incorporate patient-focused measures, like the cost of care to patients or how much a patient spends at one hospital compared to all healthcare-related spending, to strengthen their relationships with patients.

• Hospitals who have adopted patient-focused measures have used them to improve patient satisfaction, increase patient access, and enhance marketing strategies.

• In addition to incorporating patient-focused measures, hospitals and health systems must also measure and track the corresponding return on investment.”

The full report can be accessed here.

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