Nonprofit hospital expenses continued to grow last year while liquidity fell to pre-pandemic levels, according to Moody's Investor Services.
In a Sept. 7 report, Moody's outlined 2022 fiscal year trends based on data from 218 health systems. The report noted operating margins fell to"unsustainable levels" as median operating cash flow margin was 4.9 percent and median operating margin was -0.3 percent amid labor shortages and inconsistent patient volumes.
"While the industry shows signs of stabilizing in 2023, the labor environment will remain challenging," the report states.
Ten other quick observations include:
1. Median expenses grew 8.9 percent in 2022, up from 8.6 percent in 2021. Hospitals cited rising labor costs and inflation last year, which persists in 2023.
2. While expenses increased, revenue growth fell to 5.1 percent last year, a significant drop from its 11.3 percent peak in 2021. Revenue growth returned to 2018 and 2019 rates last year after federal relief related to the COVID-19 pandemic slowed.
3. The median days cash on hand hit 206 last year, down 22 percent year over year as losses mounted and hospitals repaid Medicare advances. The average debt to cash flow hit a five-year high last year of 3.6x, and median cash to debt dropped below 200 percent.
4. Median salary and benefit expenses were up 9.7 percent in 2022, driven by workforce shortages and competition for talent with other industries.
5. Medicare and Medicaid, which are among the lowest paying insurers, hit five-year highs as a percentage of total revenue for hospitals last year. Medicare was 47.1 percent of average total revenue while Medicaid was 16.6 percent. Medicaid redeterminations will likely lower the percentage of total revenue from Medicaid this year.
6. Moody's noted hospitals reinvigorated capital plans that were temporarily stalled during the pandemic last year, as median capital spending levels were up to 1.1x depreciation.
7. Hospitals' median debt to cash flow hit 3.6x last year, a five-year high.
8. Last year, inpatient admissions dropped a median rate of -0.7 percent on average, according to the report, while total admissions were flat.
9. Payers desired longer observation stays as the industry shifts to outpatient services, according to the report. Outpatient services and outpatient surgeries hit five year volume peaks.
10. Emergency room visits increased by a median growth rate of 7.7 percent last year, hitting 149,944 on average.