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Hospital financial performance remained relatively stable during the month of August, and despite higher patient volume, revenue and expenses declined on a volume-adjusted basis.

Hospital financial performance remains strong this year, with continued stabilization in the month of July. Outpatient revenue and average lengths of stay showed signs of improvement.

In this week’s graphic, we highlight nearly 30 years of historical data from Kaufman Hall and the American Hospital Association to provide a broader perspective on hospital operating margins.

After several challenging years, hospitals and health systems are experiencing modest improvements in financial conditions.

The latest Kaufman Hall National Hospital Flash Report shows that the Calendar Year to Date Operating Margin Index for hospitals was 4.1% in June.

Health systems are confronting a new normal of shrinking revenue and rising labor costs. In the second quarter of 2024, increased labor expenses accounted for 83.9% of total expenses. Additionally, the median investment/subsidy per provider rose 3% since Q2 2023.

Hospitals face enormously complex operational challenges every day. The advanced analytics used by large commercial businesses can offer solutions that improve revenue, lower expenses, and enhance patient outcomes.

Hospital financial performance remained relatively unchanged during the month of May, and the rate of change slowed for margins and other key performance indicators, which reflects stabilization.

Artificial intelligence can provide the tool necessary to untangle complex healthcare agreements and contracts. In academic healthcare, this can support efforts to restore a funds flow model to what has been legally agreed to or negotiate a new funds flow agreement.

Hospital financial performance improved in April relative to both March and the same time frame last year, though a closer examination of the data shows a greater difference in performance at the hospital level.

Overall labor expenses and revenue continue to rise, and Q1 2024 data show that labor represented 84% of total expenses. The median investment/subsidy per provider increased 2% compared to Q1 2023.

Margins and volumes declined slightly in March, which may signal more challenges ahead. Hospital outpatient revenue also fell 5%, reflecting the competitive challenges of providing outpatient care.