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While patient volumes decreased this month, expenses rose. The workforce continues to be competitive as labor expenses rose despite the dip in patient volumes.

As hospitals and health systems intensify their financial planning efforts, revisiting and refining the forecasting techniques and tools that guide their decisions has become paramount.

This month’s data show general stability, with continued growth in outpatient revenue and expense reductions on a volume-adjusted basis.

Though most indicators were down, hospital performance remained relatively stable overall, according to September data. Both inpatient revenue and average lengths of stay increased.

In the third quarter of this year, the median investment/subsidy per physician was $304,312—rising above $300,000 for the first time. Other expense metrics such as the total direct expense per provider FTE and labor as a percentage of total expenses increased.

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.