Hospitals are experiencing improved financial health as revenues outpace rising expenses and margins stabilize, according to a Kaufman Hall report based on August 2023 data. Net operating revenue rose by 8 percent, with inpatient and outpatient revenue also increasing. Meanwhile, physician practices saw growth in revenue and productivity, necessitating higher investments. This period of relative stability presents an opportunity for hospitals to re-engage in capital planning efforts and avoid falling behind competitors, says the report.
Hospitals are experiencing a boost in their financial outlook as revenues surge and profit margins stabilize, according to a recent report by Kaufman Hall. In August 2023, net operating revenue saw an impressive 8 percent increase, outpacing the 4 percent rise in overall expenses, signaling a positive trend for hospital finances.
The latest Kaufman Hall National Hospital Flash Report, based on data from August 2023, revealed that the median year-to-date operating margin index rose to 1.1 percent, up from 0.9 percent in July. Although these margins are still below historical levels, hospitals have maintained positive margins each month since March.
During this period, total hospital expenses increased by 4 percent from July to August. Labor expenses grew by 1 percent, and non-labor expenses increased by 6 percent. Notably, supply expenses and drug expenses rose by 13 percent and 11 percent, respectively, compared to July figures.
A notable finding was that total expenses per adjusted discharge decreased by 5 percent compared to July, and labor expenses per adjusted discharge dropped by 8 percent, indicating reduced reliance on contract labor.
The report highlighted that revenue growth surpassed expense increases, with net operating revenue increasing by 8 percent month-over-month and gross operating revenue rising by 9 percent. Inpatient revenue saw a 4 percent increase, while outpatient revenue surged by 12 percent from July to August, signaling a continued shift towards outpatient care.
Furthermore, the report noted year-over-year increases in gross and net operating revenue, as well as inpatient and outpatient revenue.
The data suggests that patients are returning to more typical healthcare patterns, with the average length of hospital stays decreasing by 4 percent in August. Discharges increased by 5 percent, adjusted patient days rose by 5 percent, and emergency department visits grew by 3 percent month-over-month. Operating room minutes also saw a notable increase of 13 percent.
Erik Swanson, senior vice president of data and analytics at Kaufman Hall, emphasized that this period of relative stability presents an opportunity for hospitals to re-engage in capital planning efforts. Delaying such initiatives could result in falling behind competitors and missing out on crucial opportunities.
A recent report from Syntellis echoed these findings and shed light on physician finances. It revealed that higher levels of investment are necessary to support physician practices. In August, the median investment per physician full-time equivalent (FTE) reached $254,362, marking a 6.4 percent increase from 2022. Total direct expenses per physician FTE also rose by 6.2 percent year-over-year, reaching $927,203.
Moreover, physician practices witnessed growth in revenue and productivity during August, with net revenue per physician FTE at an annualized rate of $655,852 and physician work relative value units (wRVUs) reaching 6,150.25 on an annualized basis.
