Last year was the worst financial year for hospitals and health systems since the start of the pandemic, according to Kaufman Hall's January "National Flash Hospital Report,"
At 0.2 percent, December was the only month in 2022 in which hospitals hit positive year-to-date operating margins. Despite this uptick, about half of U.S. hospitals ended the year with a negative margin as growth in expenses outpaced revenue increases.
Four takeaways:
1. Despite slight margin improvements in November and December, suggesting a positive trendline for the new year, 2022 was the worst financial year since the start of the pandemic, according to the report.
2. Last year, hospitals faced prolonged increases in labor expenses, which were driven by a competitive labor market and hospitals relying on contract labor to meet staffing demands. Increased lengths of stay due to a decline in discharges also negatively affected hospital margins.
3. Hospitals experienced increased outpatient volumes, including in surgical settings.
4. Cost pressures are unlikely to recede this year. Hospitals that prioritize better workforce management strategies, secure more stable supply lines and effectively negotiate with payers are likely to have better financial years in 2023. Hospitals should also leverage their outpatient footprint and improve relationships with post-acute settings to maximize current patient volume trends, according to Kaufman Hall.