Despite a small rebound in March, hospitals and health systems continued to experience significant decreases in revenue and patient volumes in April, according to new research—and these declines were largely driven by patients delaying care.

Hospital margins remain negative

According to Kaufman Hall's latest National Hospital Flash Report, hospitals and health systems continued to experience declining revenue and patient volumes in April despite a small rebound in March.

The median change in hospital operating margins was down 38.1% between March and April and down 76% from a year prior in April 2021. In addition, gross operating, inpatient, and outpatient revenues all declined approximately 7% from March to April. However, these revenue areas were 6.6%, 5.3%, and 8.5% higher, respectively, for the year-to-date compared with the same period in 2021.

Regarding patient volumes and days spent in the hospital, both were down 5.7% in April compared with March. Adjusted patient days also declined 6.5% from March to April but were 1.8% higher than in April 2021. Finally, adjusted discharges decreased 3.3% from March and 0.3% from April 2021.

"The main driver in the revenue decline, at least in April, was a pulling back of volumes," said Erik Swanson, SVP of data and analytics at Kaufman Hall. According to Swanson, this reduction in volume was largely due to patients delaying care, either because of concerns about rising Covid-19 cases or not feeling that they were sick enough to visit the hospital.

With decreased patient volumes impacting revenue, hospitals and health systems have also felt more pressure from high expenses, which have been impacted by labor shortages, supply chain issues, and sicker patients.

"Sicker patients come with higher resource utilization, thus driving much of the expense increases as well," Swanson said. "So, not only are there some larger macro-economic factors at play on the expense side, but as the sicker patients come in, they often require more expensive drugs and supplies, more advanced care, and tend to be a bit more expensive."

According to the report, expenses declined 4.3% from March to April, but remained high compared with 2020 and much higher than pre-pandemic levels. So far, hospitals' expenses have grown 8.3% since April 2021 and 9.6% year-to-date compared to the same period in 2021.

How hospitals can ease the burden of high expenses

Although organizations cannot manually control revenue fluctuations, Swanson said there are ways organizations can manage expenses to help ease their financial burden.

For example, hospital systems may want to utilize internal staffing agencies to assess where the labor need is greatest and send workers already on their staff to assist instead of relying on external travel nurses, who often have significantly higher rates.

"[M]any organizations are also looking to see how they can embrace more data-driven predictive type models to look at volumes and think about how they can optimize their workforce to better handle these ebbs and flows of volume," Swanson said. "This very often includes thinking about the appropriate size of float pools, the number of times that you need to pay overtime versus hiring new individuals, so many organizations are taking those approaches to bend the cost curve."

"There are quite a few levers that organizations are pulling to bend this cost curve down to ultimately improve their margins overall," he added. (Schiavo, HealthLeaders, 6/14; Kaufman Hall National Hospital Flash Report May 2022, accessed 6/15)