Michele Cusack, CFO of New Hyde Park, N.Y.-based Northwell Health, recently spoke with Becker's and offered her insights on the downward financial trends facing U.S. hospitals outlined in Kaufman Hall's "National Flash Hospital Report."
The Feb. 27 report, based on information collected from more than 900 hospitals, attributed -1 percent median margin decline for January — down from December 2022 — to decreased patient volumes and emergency department visits.
Additionally, total revenue from participating hospitals in January also slumped compared to the previous month while expenses continued to rise.
Ms. Cusack dismissed these statistics, saying hospital operating margins in January and December can't be compared accurately "due to the timing of holiday pay and certain benefit expenses that are front-loaded in the calendar year." These include FICA and pension contributions, she said.
However, when it comes to the financial outlook of health systems at large, Ms. Cusack said when considering the effects of various environmental factors, the marketplace has been in a "continual state of disruption."
Question: What are the main factors affecting downward trends cited in the Kaufman Hall report?
Michele Cusack: With over 60 percent of our patient volume participating in government or government-based programs, which pay less than the cost of providing care, the year-over-year rate trend gap between expense growth and revenue growth forces us to continually innovate and optimize our operations.
Further, recent inflationary pressures on expenses have made that trend gap insurmountable for many to achieve a positive operating margin or cash flow.
Q: How does growing competition factor into this financial equation?
MC: As we consider the nontraditional competition entering the healthcare space that are coming in and focused on pieces of profitable services, site-of-service shifts from inpatient to outpatient and payer nonpayment issues growing, it makes it even more challenging to maintain positive margins.
Q: What's your outlook for hospitals' financial health in 2023?
MC: While the challenges continue to maintain or grow volume and inflationary pressures persist on nonlabor and labor costs in January, it sets the stage for a challenging 2023.
These pressures are not unique to us or the healthcare industry. We will continue to adapt, not be controlled by, the challenges and evolve to mitigate and maintain our operating margin to continue to serve our communities. We will continue to focus on optimization of our assets, our workforce and our ability to innovate to maintain our margin.