Hospital financial metrics took another downturn in July, new report finds

The negative performance offset the moderate gains of the previous few months, according to Kaufman Hall’s monthly report.

I recently reported on several key financial and operational metrics that reflect the ongoing struggles of hospitals. One of the data sources was Kaufman Hall’s monthly National Hospital Flash Report, with June numbers showing negative margins and continued expense pressures.

The firm’s report for July was released Aug. 29, and the news remains concerning for hospitals. Of note, hospitals dealt with “some of the worse margins of the pandemic,” with a median change of -63.9% from June and -73.6% from July 2021. Median operating margin for 2022 remains negative, at -0.98%.

“Although hospitals saw gradual improvement in recent months, July reversed any gains hospitals saw this year,” according to the report, which drew on data from Syntellis Performance Solutions.

A possibly unexpected twist was seen in the report’s volume metrics, which showed a month-over-month decrease in hospital outpatient activity. There was a notable reduction in operating room minutes, which fell by 10.3%.

The decline was attributed in part to an increase in scheduled procedures in ambulatory settings — “a sign of a larger shift to ambulatory care and new ways of accessing care outside of the hospital.” In addition, there likely was a waning of demand after a bounce following the early months of the omicron variant.

One volume benchmark that increased from June was average length of stay, which rose by 2%. That’s a sign of higher acuity among hospital patients, the report notes. Emergency department visits increased by 2.6%.

In conjunction with the volume trends, gross revenue fell by 3.6% from June, although it remains up 5.5% for 2022. Outpatient revenue fell by 4.8% and inpatient revenue by 0.7%, but both are solidly in positive territory — 7.1% and 3.6%, respectively — for the year.

Meanwhile, expenses continued to be problematic. Total expenses fell by 0.4% month-over-month but remained up 9.6% for the year. Labor expenses didn’t show signs of ebbing, increasing by 3.5% from June for a cumulative 13.9% year-to-date increase per adjusted discharge.

Lack of subsidies adds to worries

The report notes that hospitals “can no longer count on supplemental federal funding to buffer these mounting losses, as they did in previous pandemic years.” That’s because the Provider Relief Fund (PRF) was depleted after the latest round of payments were sent out starting in December.

Ongoing support remains available through the Federal Emergency Management Association, which has provided funding to cover pandemic-related expenses such as labor, supplies and facility modifications. Unlike with the PRF outlays, however, there’s no allocation for lost revenue.