Kaufman Hall: Signs of hospital margin stability appearing

Hospital operating margins continued to decline in 2022 due to higher labor costs, according to a new report, but financial pressures could ease.

Median operating margins for hospitals fell 39% from 2021 to 2022 as labor costs increased 9%, Kaufman Hall’s monthly data analysis of more than 900 hospitals showed. However, spending growth slowed in December and inpatient care increased, which could signal a more stable financial outlook for early 2023, analysts said in a report. Here are five takeaways from the data.

• Median operating margins for hospitals increased 0.2% from November to December, reversing an 11-month streak of declining margins.
• Payroll costs per adjusted statement increased by 4% from 2021 to 2022. But that figure dropped 1% from November to December, suggesting that hospitals are using fewer outsourced staffing services and are operating more efficiently. The number of full-time employees per bed occupied increased by 4% from November to December.
• Hospital bad debts and philanthropic aid as a percentage of gross income fell 8% from 2021 to 2022.
• Adjusted discharges increased by 3% from 2021 to 2022, while the average length of stay remained unchanged.
• Outpatient care revenue jumped 8% from 2021 to 2022 and 20% from 2019 to 2022.