Hospitals, Providers

Hospital Operating Margins Are Growing — But Not For All

Hospitals’ finances improved in April compared to both the month prior and the same time frame last year, according to a new report from Kaufman Hall. The report also noted that there is a widening gap between the highest- and lowest-performing organizations.

Hospitals’ finances improved in April compared to both the month prior and the same time frame last year, according to a new report from Kaufman Hall. This improvement came after a first quarter that was already relatively strong for hospitals’ financial performance, the report noted.

The report showed that April was a good month for hospitals’ margins and other key performance indicators. For instance, hospitals’ outpatient revenue and operating room minutes both increased during the month.

From March to April, hospitals’ year-to-date operating margin index increased from 3.6% to 3.8%. At the beginning of 2024, this index was 4.6%, a marked increase after sitting at 2% in December of last year.

Kaufman Hall’s data also showed that hospitals’ volume of emergency department visits rose in April, reaching pre-pandemic levels. Hospitals’ daily emergency department visits increased by 1% from March to April — and by 4% from April of 2023 to April of 2024.

This trend is starting to put more pressure on hospitals across the country to effectively manage the supplies and staffing levels needed to meet this growing care demand, the report pointed out.

Meanwhile, hospitals’ average lengths of stay decreased in April. This is because hospitals are returning to more traditional care patterns and establishing more efficient post-acute care transitions, according to the report.

The report stated that the hospital industry’s financial performance seems to be stabilizing and reaching “a new normal.” This is also partially reflected in the fact that some of the nation’s largest hospital chains — including HCA Healthcare, Tenet Healthcare and Universal Health Services — reported sizable increases in first-quarter net income for 2024.

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But while hospitals’ finances may be improving overall, it is worth noting that there is a widening gap between the highest- and lowest-performing organizations.

“While financial performance looks solid on the surface, a closer examination of the data shows a greater divide between high- and low-performing hospitals. Forty percent of hospitals in the United States are losing money,” said Erik Swanson, senior vice president at Kaufman Hall. 

The hospitals that have been able to maintain financial health throughout the last few years are the ones who have taken care to adopt a wide variety of proactive cost-saving and growth strategies, such as scaling their outpatient footprint or revamping their discharge transition process, he explained.

Photo: Ta Nu, Getty Images