Hospitals nationwide are starting to see a glimmer of financial stability after grappling with the tumultuous challenges of the COVID-19 pandemic. According to the latest report from Kaufman Hall, hospitals experienced an encouraging 1.1 percent uptick in operating margins in August, driven by increased revenue and a decrease in contract labor utilization. While these margins are still below historic levels, the sector is displaying a more consistent trend of positive margins in 2023, indicating a gradual return to normalcy.
This stabilization is seen as an opportunity for hospitals to refocus on strategic planning efforts, such as capital investments, to remain competitive and seize essential opportunities.
Factors contributing to financial recovery
One notable aspect of the financial recovery is the rise in daily net operating revenue, which surged by 8% from July to August and 6% year-over-year. Outpatient settings led the way with a 12% month-over-month gain, demonstrating that patients are increasingly returning for non-emergency care. This improvement in revenue was accompanied by a reduction in bad debt and charity care metrics, providing further reassurance of hospitals’ financial well-being.
Another significant development is the decline in the average length of stay, which dropped by 4% month-over-month. This shift indicates that patients are resuming more normal patterns of accessing care, contributing to the overall efficiency of hospital operations. While daily total expenses increased by 4% month-over-month, the higher patient volumes and reduced stays resulted in a 5% month-over-month decline in total expenses per adjusted discharge. These improvements in both revenue and expenses offer hospitals a valuable window of opportunity to re-engage in strategic financial and capital planning processes.
Reinvigorate strategic planning efforts to remain competitive
The healthcare sector’s journey toward financial stability is showing promising signs of progress. Hospitals are encouraged to capitalize on this relative stabilization by focusing on strategic planning and adaptability to secure their long-term relevance and viability within their communities and the broader healthcare industry.
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