Kaufman Hall finds inflation and high expenses continue to hinder hospitals' bottom line.
Hospitals saw their finances break dead even in April with a 0.0% median operating margin as the COVID-19 public health emergency concluded, according to a Kaufman Hall.
The healthcare consulting firm's National Hospital Flash Report highlighted hospitals' lack of financial wiggle room even as the media year-to-date operating margin index slightly improved from -0.3% in March. The report uses data from more than 900 hospitals from Syntellis Performance Solutions.
Hospitals dealt with increases in bad debt and charity care in April, Kaufman Hall stated, which could be the result of widespread disenrollment from Medicaid after the public health emergency ended last month. That, combined with patient volumes dropping while lengths of stay increased, has negatively affected hospitals.
"With states conducting their Medicaid eligibility redetermination, it's predicted that hundreds of thousands of people will ultimately become uninsured," Erik Swanson, senior vice president of Data and Analytics with Kaufman Hall, said in a statement. "The data indicate that we may already be seeing the effects of disenrollment materialize with patients less likely to seek out the care they need and a continued rise in bad debt and charity care."
High expenses continue to put pressure on hospitals, with labor expense per adjusted discharge increasing 3% from March to April, the report revealed. Meanwhile, the costs of good and services remain above pre-pandemic levels.
Though total expenses slightly declined in April, that was offset by operating revenues suffering a 5% decrease month-over-month.
"Hospital and health system leaders must figure out how to navigate the new financial reality and begin to take action," Swanson said. "In the face of operating margins that may never fully recover and inflated expenses, developing and executing a strategic path forward to a future that is financially sustainable is crucial."
Jay Asser is the contributing editor for strategy at HealthLeaders.
KEY TAKEAWAYS
The latest Kaufman Hall National Hospital Flash Report shows the median year-to-date operating margin index for hospitals was 0.0% in April, improving slightly from -0.3% in March.
Lack of patient volume, combined with an increase in bad debt and charity care, is indicative of hospitals facing the effects of the Medicaid continuous enrollment provision ending.
Operating revenues suffered a 5% hit month-over-month while labor expense per adjustment discharge increased 3% in April.