Hospital margins grow, but bad debts and expenses continue to climb
Financial conditions among U.S. hospitals have improved at the end of the second quarter of this year, but there are still gaps between the highest and lowest organizations, according to new research released by Kaufman Hall.
The consulting firm, which analysed data from 1,300 hospitals nationwide, found that hospitals' financial profit margins rose by 3.7% in June, up from 1.9% in May.
The report notes that hospitals grow on a volume-adjusted basis – meaning that hospitals actually earn more per patient, rather than providers just seeing more people. Hospitals are also seeing increased outpatient revenue, which shows that hospitals are figuring out how to best utilize their outpatient facilities.
“Higher performers are weak in terms of revenue and expenses,” Kaufman Hall managing director Erik Swanson said in a statement. “They may be expanding their outpatient footprint by focusing some features to expand their outpatient footprint, diversifying services or managing fees for purchases. They are also more likely to have value-based care or bundled care arrangements.”
In an interview last summer, Swanson pointed out that hospitals with strong financial conditions also tend to place great emphasis on patient throughput, which can lead to timely and appropriate discharge of patients.
He advises smaller hospitals to take action regardless of their future. This means doing things like tightening day-to-day operations and ensuring they accurately capture all the income they owe.
These steps can help stabilize the hospital’s financial situation in the short term, while also making the organization more attractive to future partnerships or branches.
Kaufman Hall's report also shows that hospitals' bad debts rose in June compared to the previous month. It noted that bad debts are growing at a greater rate than in previous months, which could indicate a change in the number of patients covered by public programs such as Medicaid.
In addition, the study found that non-labor spending and purchased services in hospitals continued to increase.
Despite modest improvements, the increase in costs and bad debts remains a serious concern for the hospital. Without a constant focus on efficiency and revenue capture, weaker organizations may become more unstable.
Photos: PM image, Getty image
