Report: Hospitals’ Operating Margins and Patient Volumes Dip in March
The latest report from Kaufman Hall has revealed that hospitals’ operating margins and patient volumes experienced a slight decline in March, raising concerns about potential financial challenges ahead for healthcare facilities.
According to the report, hospitals’ operating margin index for March closed at 3.4%, a decrease from February’s 3.6%. Despite this dip, the year-to-date operating margin index stood at 3.9%, significantly higher than the 1.9% index at the end of 2023.
Erik Swanson, senior vice president at Kaufman Hall, expressed uncertainty about the future impact of these declines on hospitals’ financial health. While there is no indication of a significant drop in patient volumes, the next few months will provide more clarity on the long-term trends.
One notable finding from the report was a 5% decrease in hospitals’ outpatient revenue in March, attributed to the competitive outpatient care landscape. Hospitals are facing increased competition from peer organizations, retailers, and nontraditional providers as they pivot to offer more outpatient care options.
Additionally, hospitals are grappling with rising bad debt and charity, along with increased days in accounts receivable. Swanson suggested that the recent Change Healthcare cyberattack may have contributed to the increase in accounts receivable balances, while shifting payer mix away from commercial payers could be driving up bad debt.
To counter the declining revenue and volume trends, the report recommended that hospitals focus on growth in high-performing areas such as ambulatory surgery centers, pharmacies, and imaging services. Establishing a retail presence could also be beneficial for some hospitals.
As hospitals navigate these financial challenges, it will be crucial for healthcare leaders to adapt and innovate to ensure the sustainability of their operations in the face of evolving market dynamics.