Latest hospital financial and jobs data reflect an environment that remains challenging

Metrics for margins, volumes and expenses illustrate that even as the latest pandemic surge wanes, hospitals still aren’t back to anything resembling “normal.”

January financial data for hospitals show the continuing toll of the COVID-19 pandemic, while February labor numbers suggest an operational recovery that could further increase expenses.

Kaufman Hall described January as “a devastating month for hospitals and health systems,” citing data published in its latest National Hospital Flash Report. The omicron variant of the novel coronavirus was in full force for much of the month.

Median operating margins finished the month at -3.68% after dropping by 71.3% month-over-month and 23.7% year-over-year, Kaufman Hall reported, drawing on data compiled by Syntellis Performance Solutions. Operating EBITDA margin fell by 14.6% year-over-year nationally and likewise declined in four of five regions, with the Northeast/Mid-Atlantic Region the lone exception.

Inconsistent volumes continued to be a driver of the financial challenges. Operating room minutes were 15.7% lower than in December and 20.4% lower than before the pandemic. However, patient days increased by 1.7% and average length of stay by 8.6% month-over-month, owing to higher acuity levels among patients who required hospital care.

Thus, while inpatient revenue increased by 2.7% from December, outpatient revenue fell by 7.5%. The net result was a 4.7% drop in gross operating revenue.

“Our nation’s hospitals and health systems had a very difficult month to start the year,” Erik Swanson,  senior vice president of data and analytics with Kaufman Hall, said in a news release. “While COVID-19 cases have swiftly declined since peaking in mid-January, the effects of the sudden and sizable margin and outpatient volume declines will be felt throughout 2022.”

A look at the labor market

The latest numbers from the U.S. Bureau of Labor Statistics suggest hospitals are trying to meet patient demand for hospital services — an increase that could foreshadow continuing inflation in labor costs.

Hospitals added 2,700 jobs in February, even as the biggest job gains in the healthcare industry continued to come in ambulatory care. That segment added 53,600 jobs, including 19,700 in home healthcare and 15,100 in physician offices.

It initially was reported that hospitals added 3,400 jobs in January, but BLS since has updated its data to reflect a net loss of 800 jobs that month. Since February 2021, hospitals have added 7,200 jobs.

With the demand for labor comes the likelihood of increased expenses. In January, labor expenses rose by 14.6% per adjusted discharge, according to Kaufman Hall’s report. That was the biggest factor in an overall expense increase of 11.6% per adjusted discharge.

Year-over-year, labor expenses jumped by 14.2% even as FTEs per occupied bed dropped by 4.2%.

“These trends reflect the impacts of wage pressures as hospitals compete in a tight labor market,” Kaufman Hall wrote.