Hospitals’ finances have remained much more stable in 2024 than last year, according to a new report from Kaufman Hall. The report is based on financial data from more than 1,300 hospitals, with the latest data being from October.
“There’s been a slight underperformance relative to pre-pandemic levels — however, seeing the median operating margins being consistently positive throughout the course of 2024 is a good sign,” said Erik Swanson, senior vice president at Kaufman Hall.
The report showed that during October, hospitals’ year-to-date operating margin index was 4.4%, a slight increase from 4.3% in September.
Improvements in patient volume are a big reason for hospitals’ financial stability this year, Swanson noted.
“Generally, we’ve seen a return towards slightly more normal acuity — we’ve seen average length of stay and some of these indicators fall slightly from some of the highs during the pandemic. That is a good sign, as it means there is a more normal patient population coming in and being treated,” he explained.
He also pointed out that many hospitals have improved their care transition process. Making sure patients are discharged or transferred to a post-acute site of care in an efficient manner plays an important role in managing the length of stay, Swanson said.
The fact that patients are staying in the hospital for a shorter amount of time leads to lower utilization of goods and supplies, he added.
Swanson also highlighted that patient volume levels have fluctuated less than they have in recent years — which makes it easier for hospitals to plan and deploy resources effectively to meet that demand.
“If we look at last year and the year prior, a lot of the cost that hospitals incurred was due to contract labor — where they had to bring in those outside labor resources generally to fill in for some of the ebbs and flows of volume. That has stabilized to some degree, so organizations are going to a more full-employment model. Some of those labor costs, on a volume-adjusted basis, have fallen slightly,” he noted.
He also pointed out that outpatient services have been representing a bigger and bigger chunk of hospitals’ revenue over the past couple years.
Hospitals that don’t have a strong outpatient footprint will likely face challenges, Swanson said. These hospitals have to compete with their peers, and it will be difficult to do that if their competitors are delivering care in lower-cost sites, he explained.
Photo: JamesBrey, Getty Images
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