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A Mixed Bag: New Study Highlights Hospital Health

June 5, 2024

Perfection is a nearly impossible standard, a practically unreachable goal. No one earned a perfect score in the modern Olympics era until Romanian gymnast Nadia Comaneci came along in 1976 with her peerless performance on the uneven bars—10.0. In medical terms, a “clean bill of health” may be given out fairly routinely, but that doesn’t mean the recipients of such proclamations don’t have the occasional wart, ingrown toenail or crooked tooth. Again, perfection is hard to achieve.

When assessing the health of America’s hospitals, things may be looking up; but, if you’re looking for perfection, Nadia now lives in Oklahoma.

National consulting firm Kaufman Hall (KF) has released its National Hospital Flash Report, which assesses the current financial wellbeing of U.S. medical facilities. The report “uses both actual and budget data over the last three years, sampled from more than 1,300 hospitals on a recurring monthly basis.” The sample of hospitals for this report is said to be representative of all hospitals in the United States both geographically and by bed size.

In addition, hospitals of all types are represented in the report’s analysis—from large academic facilities to small critical access hospitals (CAHs). According to KF, “Advanced statistical techniques are used to standardize data, identify and handle outliers, and ensure statistical soundness prior to inclusion in the report.” So, it would appear that the report’s findings are well worth considering. So, what do those findings tell us?

On the Rebound

The first thing to note is that hospital “margins” averaged 4.3 percent in April, which represents a robust 33 percent increase year over year. Operating margins were up seven percent month over month, and year to date operating margins were 21 percent higher than in 2023. Operating EBITDA margin year to date was up 14 percent over the same period last year, and flat with hospital performance in 2021.

Net operating revenue per calendar day jumped nine percent year to date in April, and five percent over March 2024. Inpatient revenue climbed 12 percent year over year in April. The hospital operating margin index also increased in April to 4.3 percent after three months of decline. Of note, the data revealed the following:

  • April data show a relatively strong month, with margins and other key performance indicators, including outpatient revenue and OR minutes increasing.
  • Average lengths of stay decreased, reflecting a return to more normal care patterns and the establishment of stronger post-acute care transitions.
  • Emergency department visits have increased and are back up to pre-2020 levels, putting additional pressure on hospitals and health systems.

Areas of Concern

While hospital margins are improving overall, the study revealed that the gap between the highest and lowest performing hospitals is actually widening. The best performing hospitals had a margin of 28.9 percent, compared with -16.1 percent for the worst performing hospitals.

Added to these somber statistics is this dismal data point: 40 percent of hospitals in the United States are losing money. According to Erik Swanson, senior vice president of data and analytics at Kaufman Hall:

While financial performance looks solid on the surface, a closer examination of the data shows a greater divide between high- and low-performing hospitals. Organizations who have weathered the challenges of the last few years have adopted a wide range of proactive and growth-related strategies, including improving discharge transitions and building a larger outpatient footprint.

While hospital margins have demonstrated improvement over the last several years, growth has slowed in the last few months and may be settling on a new normal, according to the report. When coupled with other factors causing downward pressure in the overall economy (e.g., inflation rate, flagging reimbursement, increased Medicare population, struggles with physician and nurse recruitment and retention), those hospitals already under financial pressure may continue to see a slide. For some, the long-term future may involve shutting their doors or selling out to those hospitals and hospital systems that are doing well.

For those who would like to see the full report, including its helpful array of graphs and charts, click on the following link: Kaufman Hall | National Hospital Flash Report.

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