Liquidity continues to be a problem for hospitals as they recover financially from the pandemic and inflation over the last four years, according to a new report from Syntellis, part of Strata.
The March 22 report surveying the financial performance of 1,900 hospitals found days cash on hand is still down 25% year to date compared to 2022, which the report authors wrote reflects "a need for hospitals to rebuild these critical cash reserves to ensure greater stability for the long term."
"The steep decrease versus two years ago highlights the continued financial uncertainties for the sector, as having lower cash reserves means hospitals are less prepared for unexpected emergencies or sudden market changes, such as natural disasters or mass casualty events," the report notes.
The data doesn't take into account the full impact of Change Healthcare's data breach, which occurred in late February and disrupted claims processing for many organizations well into March. Hospitals with lower days cash on hand were most negatively affected by the disruption, according to Moody's. Some hospitals risked running out of cash without additional support. Both UnitedHealth Group, which owns Change, and the federal government have launched initiatives to help struggling hospitals.
Expenses remained high in the first two months of the year, with supply expenses up 12.5% and labor expenses increasing 7.1% year over year. Hospitals are also seeing significantly more outpatient revenue, which climbed 15.6% year over year.
There was some good news in the report. Overall operating margins increased 6.4% year to date, reflecting more stability than in 2023.