Hospital margins steady amid disruption: 5 notes

Average nonprofit hospital margins hit 2.3% in September but performance was hampered by increased expenses and drug costs, according to Kaufman Hall’s “National Hospital Flash Report” released Nov. 12.

The report outlines September financial data from 1,300 hospitals across the U.S. based on data from Strata Decision Technology. The margin performance persisted as hospitals navigate federal policy changes and increased expenses mid-year.

Five things to know:

1. Hospital financial performance remains stable. For the month of September, operating margins hit 2.3%, down a percentage point from July and on-par with results from January through May. Year-to-date average operating margins in September hit their highest point since January at 2.9%.

2. Average operating margins in September increased 1 percentage point month over month and are up 31 percentage points compared to September 2022. Operating EBITDA margins were relatively flat year over year and month over month in September.

3. Revenue is growing at the same clip as expenses. Average net operating revenue increased 8 percentage points year over year in September and 4 percentage points month over month. Inpatient revenue per calendar day increased 11 percentage points year over year while outpatient revenue was up 13 percentage points nationally.

4. Non-labor spending increases drove expenses in September. Total expenses increased 8 percentage points year over year with labor increasing just 5 percentage points. Supply expenses per calendar day were up 13 percentage points and drug expenses increased 14 percentage points year over year. Report authors noted hospitals used more advanced pharmaceuticals in the month. Purchased services had slower growth at 8 percentage points.

5. Patient volume increased steadily with discharges per calendar day increasing 4 percentage points year over year. Average length of stay dropped 3 percentage points while the number of ED visits increased slightly. The adjusted patient days per calendar day in September increased 3 percentage points year over year.

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