‘Challenges on Horizon’ for Hospital Finances

March 29, 2024

Hospitals saw an overall improvement in the national financial outlook last month, but concerns stemming from the Change Healthcare cyberattack were looming heading into March.

Released this week, the latest Kaufman National Hospital Flash Report noted new trends in hospitals’ payor mix and the continued usage of outpatient care.

“Robust hospital margins in February demonstrate continued recovery from the pandemic years, but challenges are on the horizon,” Erik Swanson, senior vice president of data and analytics, Kaufman Hall, said in a statement. Swanson is among the featured speakers during HAP’s 2024 Leadership Summit next week.

Here’s what you need to know:

• Optimism with a caveat:  The reported noted the Kaufman Hall Monthly Operating Margin Index for February was 3.96 percent, but this does not fully account for the full impact of the Change Healthcare cyberattack.
• Care settings:  Outpatient revenue is playing a key role in hospital finances. Outpatient revenue increased 12 percent year-over-year, while inpatient revenue per calendar day was up 9 percent year-over-year.
• Top costs:  Labor expenses were up 3 percent year-over-year during February. The largest increases in expenses included supplies (9%) and drugs (9%).
• Action steps:  The health care analyst noted hospitals should take steps to preserve liquidity; monitor denial rates as claim backlogs clear out; manage processing backlogs when possible; anticipate heightened interest in cybersecurity; and diversify clearinghouse and banking vendors.
• Quotable:  “The aftermath of the Change Healthcare cyberattack and continued competition from industry disrupters may test financial performance in coming months, as disrupters capture more profitable, lower-acuity, and lower-capital-intense services from hospitals,” Swanson said.

The Kaufman Hall report reviews data from 1,300 hospitals and is available to review online.