Hospitals have been on a roller coaster ride the past couple of years. Is it over yet?
The COVID-19 Omicron surge is calming down, at least for now, but many hospitals are still struggling financially. Some areas of hospital performance remain depressed, and HCOs are still facing labor shortages and supply chain issues, which drive up costs.
In January, the Kaufman-Hall National Hospital Flash Report was released. The Flash Report, which analyzed and compiled data from more than 900 hospitals, contains a wealth of information that yields some critical industry insights. Let’s dig in.
- Overall hospital performance remains below pre-pandemic levels, but is showing steady improvement. Compared to year-end 2020, when profit was nonexistent, hospitals are now operating in the black, with a margin of 2-4%. This may be a new normal that reflects movement of care from acute settings to telehealth, urgent care, and retail care settings. Hospitals will need to carefully analyze their own data to determine root causes and changes. Advanced data analytics solutions designed for hospital medicine can empower health systems to optimize operational efficiency and profitability.
- Volumes softened at the end of 2021, but LOS increased, suggesting an increase in case severity. Patient discharges were below budget for all regions of the United States, but rose year-over-year for four out of five regions. Average length of stay also rose year-over-year for all five regions, especially for medium-sized hospitals. This increase in length of stay suggests a higher case mix index, representing sicker patients overall. Reducing length of stay will require that hospitals carefully assess this change to determine what must be adjusted to accommodate a sicker patient population.
- Consumers may still be postponing care. Although outpatient surgical revenue has been experiencing a year-over-year increase since 2019, it still lags behind pre-pandemic levels. This suggests that more care has been skipped or postponed during the pandemic than previously suspected. Recurrent variant surges may be to blame for erratic numbers of surgeries. Hospitals will need to aggressively contact those who may have fallen off the schedule to get care paths back on track. Reassurance of safety protocols and communication of strict standards of care will be key.
- Labor expenses and shortages are significant challenges. Both total expenses and labor expenses per adjusted discharge rose year-over-year and were above budget for four out of five U.S. geographical regions. The West had the largest increases, with expenses up 17% (total expenses) and 28.8% (labor expenses). These numbers reflect a shortage in the health care labor market and reliance on more expensive labor sources, such as overtime and agency staff. Full-time equivalents (FTEs) per adjusted occupied bed (AOB) were below budget for all regions. This rapid rise in overall expenses, especially labor, is a huge concern for hospitals as they struggle with low margins. Staffing and recruitment of critical workers is a challenge for many industries, and health care is no exception. Without enough staff, hospitals find themselves in the position of closing beds, creating a downward spiral for financial health.
Challenges Ahead for Hospitals
While the news isn’t all bad, optimism for hospitals is cautious. Huge challenges exist in the labor market, resulting in hospitals budgeting to increase their internal minimum wages, offer bonuses and retention packages, and raise salaries overall.
As supply expenses increase, it becomes necessary for hospitals to become very efficient and to competitively negotiate for payer contracts. At the same time, payers are nervous about the risk involved in long-term effects of COVID-19 patients and the increase in chronic disease.
According to a November 2021 article in Fierce Healthcare, this is expected to lead to a large increase in health care costs for consumers, just to keep hospital systems afloat. This trend also is expected to drive further mergers of health care companies, joint ventures, and outsourcing of some service lines. One thing is for certain: Health care is changing rapidly while trying to reach an equilibrium.
To manage the rapidly shifting landscape, accurate and timely data is required. Health care leadership must have accurate information to make vital decisions and gain insight into the local market. Rapidly evolving systems require confidence in action plans that work. To gain more insight than ever before, d2i works with your data to find the right pieces to form plans for the future. Contact d2i — Our hospital medicine data analysts are ready to show you what our powerful performance analytics applications can do.