Hospital Margins Drop to 2.1% as January Costs Rise, Volumes Fall

Overview

• Total expenses per calendar day rose 5% year over year in January, with labor and supply costs up 5% and drug expenses up 7%.
• The median operating margin fell to 2.1% from 4.9% in December, with overall margins declining an estimated 17% to 20% month over month.
• Patient volumes decreased across inpatient and outpatient settings, net operating revenue fell 5% month over month, and hospitals reported discharges down 2%, emergency visits down 5%, and average length of stay down 3% year over year.
• Bad debt and charity care per calendar day increased 8% year over year, with shifts toward high-deductible health plans cited as a factor in rising uncollected patient balances.
• Kaufman Hall, using real-time data from more than 1,300 U.S. hospitals, cautions that elevated labor costs, rising drug and supply prices, and uncompensated care are unlikely to ease this year, urging disciplined resource allocation.