Kaufman Hall: Hospitals’ Margins Edging Up Gradually

Jan. 10, 2024
Kaufman Hall analysts are seeing a gradual improvement in hospital organizations’ finances, according to the consulting firm’s latest report

Analysts at the Chicago-based Kaufman Hall consulting and analytical firm published a report on Jan. 9 that points to a gradual improvement in hospital organizations’ finances, with revenue margins edging up over time.

A press release posted to Kaufman Hall’s website on Tuesday began thus: “The latest National Hospital Flash Report finds that hospitals are beginning to recover from the long-term strain of the pandemic and subsequent economic challenges, though the gap between high and low performers remains quite wide.” The press release noted that “Hospitals’ operating margins improved in November compared to the previous year, and other data points indicate movement toward recovery. The median calendar year-to-date operating margin index for hospitals was 2.0 percent in November 2023, as margins continue to trend positive.”

What’s more, “Inpatient and outpatient revenue increased year-over-year by 5 percent and 9 percent, respectively. Total expense per adjusted discharge declined, while revenue per adjusted discharge increased—an indicator of financial recovery for hospitals,” the press release noted.

The press release noted that “The average length of stay for patients in hospitals declined by 6 percent year-over-year, a sign that patient acuity—or the severity of illness—is returning to more normal levels. Organizations that have adopted value-based and bundled payment models will benefit further as they transition and provide care in the appropriate clinical setting.”

And it quoted Erik Swanson, senior vice president of data and analytics at Kaufman Hall, as stating that, “As performance indicators stabilize, hospitals should take advantage of the relative stability and re-embrace strategic growth if they hope to see continued success in 2024. Growth strategies may vary from hospital to hospital, but all leaders should ensure that they are supporting goals beyond just profitability and scale, including business model transformation and diversification, Swanson said.

The report itself noted three “Key Takeaways”:

Ø  Hospital performance in November signals continued stabilization and growth. Operating margins improved compared to the previous month and last year, and other data points indicate movement towards recovery, though the gap between high and low performers remains quite wide.

Ø   Revenue per adjusted discharge has increased while total expense per adjusted discharge has decreased month-over-month and year-over-year—a sign of financial recovery. This reflects the  efforts organizations have taken to deliver care in the most effective settings and reduce reliance on contract labor where possible.

Ø  Average length of stay declined indicating a shift towards more normal patient acuity. Organizations that have adopted value-based and bundled payment models will benefit further as they transition and provide care at the appropriate clinical setting

 

The full report can be accessed here.

 

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