Outpatient revenue growth in the past year is providing some reason for optimism.
Even with high costs plaguing healthcare organizations, hospital margins are trending in a positive direction.
The median year-to-date operating margin for hospitals nationwide creeped up to 5.1% in September after hitting 4.9% in August and 4.8% in July, representing a 2.1% increase year over year, according to data from Strata.
Health systems, however, saw operating margins fall for a third consecutive month to 1.6% in September, down from 1.9% in August, as well as from 12-month high of 2.3% in May and June.
Organizations are contending with swelling labor and non-labor costs as total expense was up 5.9% from September 2023 to September 2024. On the non-labor side, costs jumped 6.3% year over year due to increases in purchased services expense (8.8%), supply expense (8.6%), and drugs expense (6.8%). Labor costs, meanwhile, grew 5.2%.
Compared to August, total expenses in September decreased 2.2%, including a downturn of 2.3% for labor costs and a 2% decline for non-labor costs.
Revenue also slumped month over month, with gross operating revenue decreasing 4.2%, outpatient revenue falling 4.8%, and inpatient revenue shrinking 3.2%. Nonetheless, revenue has significantly improved year over year is up 8.7%, driven largely by a 9.1% jump in outpatient revenue, which outpaced the growth of inpatient revenue at 6.4%.
Patient volume followed a similar pattern, with September showing a month over month drop-off but a year over year jump in outpatient visits and inpatient admissions. Outpatient visits showed the biggest improvement, increasing 3.8% since September 2023, while inpatient admissions rose 2.7%.
Many providers are upping their investment in outpatient services to meet higher demand without incurring the same expenses associated with inpatient settings.
Community Health Systems is a recent example as the hospital operator signed a definitive agreement to acquire 10 urgent care centers in Arizona from Carbon Health.
Jay Asser is the CEO editor for HealthLeaders.
KEY TAKEAWAYS
Hospitals’ median year-to-date operating margin inched up for a second straight month while health systems’ margin fell for a third consecutive month, data by Strata reveals.
Though labor and non-labor expenses are hampering organizations, revenue is also rising, particularly on the outpatient side.
Due to increased demand and the value proposition of outpatient services for providers, hospitals and health systems are placing more attention there.