Low Revenue, Patient Volumes Led Hospital Finances to Regress

June 02, 2022 - After experiencing some early signs of relief in March, hospital finances regressed in April 2022, with facilities seeing significant decreases in revenue and patient volumes, Kaufman Hall’s National Hospital Flash Report found.

The report includes actual and budget data from more than 900 hospitals. The most recent data reflects hospital performance during April 2022.

COVID-19 cases and hospitalizations increased steadily throughout April, reversing the temporary financial respite of the prior month.

Hospital operating margins remained negative for the fourth consecutive month at -3.09 percent.

The median change in operating margin declined 38.1 percent month-over-month and 76 percent year-over-year. The median change in operating earnings before interest, taxes, depreciation, and amortization (EBITDA) margin decreased 26.8 percent from March and 51.5 percent from April 2021.

Patient volumes and the average length of stay also fell in April.

Patient days declined 5.7 percent from March and 1.8 percent from April 2021, while adjusted patient days dropped 6.5 percent month-over-month. The average length of stay decreased by 2.2 percent from March to April but increased by 3.5 percent compared to April of last year.

Adjusted discharges were down 3.3 percent compared to March and 0.3 percent compared to April 2021. Additionally, operating room minutes fell 8.9 percent month-over-month and 6.2 percent year-over-year. Emergency department visits declined 1.3 percent in April but were up 8.6 percent from last year.

“Hospital patients in 2022 are likely sicker, harder to discharge, and more expensive to treat than hospital patients in 2021,” Erik Swanson, senior vice president of data and analytics at Kaufman Hall, said in a press release. “Fewer patients who are sicker and more expensive weigh heavily on hospitals’ operating margins, putting a strain on both expenses and revenue.”

The decline in patient volumes was reflected in the poor revenue performance in April. Gross operating revenue and outpatient revenue both dropped 7 percent from March, while inpatient revenue fell 7.1 percent. However, all revenue levels were up year-to-date compared to 2021, the report noted.

Hospitals saw slightly lower expenses in April, dropping 4.3 percent from March, but expenses were still significantly high compared to pre-pandemic levels. Total expenses increased 8.3 percent year-over-year and 9.6 percent year-to-date due to ongoing labor shortages and supply chain challenges.

Total expense per adjusted discharge dropped 1 percent, labor expense per adjusted discharge was down 0.6 percent, and non-labor expense per adjusted discharge fell 0.9 percent from March.

“Labor shortages, high prices for supplies, and cost increases to treat sicker patients over longer stays are ballooning hospital expenses. With a bleak consensus outlook for the US economy, those factors and their effects could be here for a while,” Swanson continued.

“The first four months of 2022 have been challenging for the nation’s hospitals and health systems, which has been borne out in the losses many providers have reported so far this year. Even if margins return to pre-pandemic levels, many hospitals may likely end the year with substantially depressed margins.”

Experts briefly thought that some of the pandemic pressures on health systems would start to lift when hospitals saw higher revenues and outpatient volumes with lower expenses in March. But as the pandemic continues and case numbers keep rising, hospitals are back to where they were at the start of 2022.

Hospital groups have continuously stressed how facilities are still facing financial challenges. In April 2022, the American Hospital Association released a report detailing how hospitals have lost billions of dollars, experienced workforce shortages, and dealt with practice management hurdles due to the pandemic.