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Hospitals See Financial Improvement in 2023, but Challenges Remain

by Fred Pennic 01/30/2024 Leave a Comment

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What You Should Know:

– After enduring the worst year in recent memory, 2023 offered hope for hospitals and health systems, with data from Kaufman Hall showcasing general improvement across operational and financial measures.

– The January issue of the National Hospital Flash Report reveals that while the road to full recovery is still under construction, the latest trends suggest a cautiously optimistic outlook.

Financial Rebound, But Pre-Pandemic Levels Still Elusive

The median operating margin index for hospitals reached 2.3% by December, with year-end adjustments adding a slight but welcome boost. Notably, outpatient revenue surged by over 40% compared to 2020, signaling a shift towards alternative care settings. However, Erik Swanson, Kaufman Hall’s senior vice president of Data and Analytics, cautions that “today’s care and business models look very different.”

Length of Stay Seesaw: From Reduction to Potential Rebound?

The average length of stay declined as hospitals prioritized patient discharge efficiency. However, this trend might see a reversal as lower acuity cases increasingly gravitate towards outpatient settings. This shift, while potentially cost-efficient, requires hospitals to adapt their service models and infrastructure accordingly.

Provider Productivity Soars, But Expenses Follow Suit

While provider productivity is on the rise, expenses are outpacing revenue growth. The median investment/subsidy per provider jumped to $225,685, primarily driven by a 9% increase in physician compensation. Interestingly, the data highlights the growing importance of advanced practice providers (APPs), with hospitals employing APPs making up 38.1% of the total workforce.

Future Outlook for 2024

Kaufman Hall experts emphasize the need for hospitals to rethink physician employment models and find ways to reduce reliance on subsidies. Adapting to changing patient preferences and embracing outpatient care models will be crucial for long-term success. Matthew Bates, Managing Director at Kaufman Hall, emphasizes the need for hospitals to “reconsider whether subsidizing physicians is a sustainable financial future.” He encourages organizations to critically evaluate their physician employment model and link it to long-term financial strategies.

Report Background/Methodology

The National Hospital Flash Report draws on data from more than 1,300 hospitals from Syntellis Performance Solutions. The Physician Flash Report draws on data based on more than 200,000 providers, also from Syntellis.

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