Persistent, heightened labor expenses pummeled hospitals last year, Kaufman Hall reports

Dive Brief:

Hospitals suffered their worst financial year in 2022 since the onset of the COVID-19 pandemic as negative margins and heightened labor expenses persisted for operators, according to a report out Monday from Kaufman Hall.
About half of U.S. hospitals finished the year with negative margins as expenses outpaced revenue, though they did see modest improvements at the end of the year. December was the only month with a positive median year-to-date operating margin index for hospitals at 0.2%.
Hospital labor expenses rose 2% from November to December, the report found.

Dive Insight:

Persistent heightened labor costs have been a financial challenge for hospital operators throughout the pandemic as they now face a competitive market and continued reliance on temporary staff.

“As we saw throughout 2022, the labor market was unkind to hospitals and provider groups,” Erik Swanson, senior vice president of data and analytics at Kaufman Hall, said in a release.

“Given that labor and non-labor expenses are unlikely to recede in 2023, hospitals can embrace better workforce management strategies and leverage their relationships with post-acute care settings to maximize current patient volume trends,” he said.

Hospital volumes rose in December, particularly outpatient volumes, as patients avoided emergency departments and opted for ambulatory and outpatient surgical settings.

That led to increased provider productivity and revenue, according to another Kaufman Hall report.

Net patient revenue per provider full time equivalent rose to $397,493 — up 8% year over year, according to Kaufman Hall’s physician flash report.

“The pandemic fueled a fundamental shift in how patients are choosing to access their routine care,” Matthew Bates, managing director and physician enterprise service line lead with Kaufman Hall, said in the release.

“Providers are seeing more patients than ever, particularly in primary care settings, and care is moving away from hospitals. Medical groups should seek to improve individual provider productivity and efficiently integrate advanced practice providers to meet the increase in volume and successfully bend the cost curve,” he said.