Hospital Operating Margins Stagger While Supply and Drug Expenses Grow, According to New Syntellis Performance Solutions Data
Outpatient demand continues to rise, contributing to a sixth month of revenue gains
CHICAGO – Dec. 1, 2023 – U.S. hospitals and health systems saw increases in revenues and patient volumes in October, but high costs continue to drag down overall financial performance, according to new data report from Syntellis Performance Solutions, now part of Strata Decision Technology.
The median operating margin for hospitals nationwide, measured as actual year-to-date operating margin, remained unchanged at 1.6% for a second consecutive month in October. The flat performance continued a trend of unsteady operating margins. Since moving back into the black in March after more than a year of negative results, the metric has seen minimal movement most months, with the biggest increase followed by a sizable drop from June to July.
“Hospitals continue to see gains in key areas, including six straight months of growth in inpatient and outpatient revenues,” said Steve Wasson, chief data and intelligence officer with Strata Decision Technology. “At the same time, persistent increases in total expenses continue to pressure hospital operating margins, making it difficult for these vital organizations to gain a solid foothold as they work to rebuild financial health.”
Patient volumes increased across most metrics in October after weak performance the month before. Adjusted discharges rose 7.6% year-over-year (YOY), adjusted patient days were up 1.3% YOY, and operating room minutes rose 3.2% YOY. Emergency department (ED) visits were nearly flat, increasing just 0.5% compared to the same month in 2022.
Hospitals saw double-digit growth in outpatient revenues as patient demand for convenient, outpatient services continued to grow. From October 2022 to October 2023, outpatient revenue jumped 12.3% and inpatient revenue increased 7.1%, pushing gross operating revenue up 10%. The gains marked a sixth consecutive month of YOY increases for the three metrics.
Hospital expenses remained on the rise due to inflation, increased patient demand, and other factors. Supply and drug expenses saw the biggest increases. Supply expense jumped 11.4% YOY and drugs expense was up 9.8% YOY. Such expenses increased even after being adjusted for patient volumes, with supply expense per adjusted discharge up 3.4% and drugs expense per adjusted discharge up 3.6% compared to October 2022.
Rising supply and drug costs contributed to a 7.3% YOY increase in total non-labor expense. Total expense rose 5.2% YOY while total labor expense was up 2.9%. Most volume-adjusted expense metrics decreased for the month. Compared to October 2022, total expense per adjusted discharge was down 2.2%, labor expense per adjusted discharge decreased 4.5%, and non-labor expense per adjusted discharge was down 0.5%.
About the Data
This report uses data from Syntellis’ Axiom™ Comparative Analytics. The solution offers access to near real-time data drawn from more than 135,000 physicians from over 10,000 practices and 139 specialty categories, and from 500+ unique departments across more than 1,300 hospitals. Powered by Syntellis IQ, Axiom Comparative Analytics also provides data and comparisons specific to a single organization for visibility into how their market is evolving.
About Strata Decision Technology
Strata Decision Technology provides a cloud-based platform for software and service solutions to help healthcare providers better analyze, plan, and perform in support of caring for their community and reducing the cost of care. More than 800 healthcare delivery systems rely on Strata’s StrataJazz and Axiom solutions. Strata has been named the market leader for Business Decision Support for 17 consecutive years, and its Axiom solutions have maintained HFMA Peer Review designation for nearly a decade along with No. 1 rankings from Black Book Research for multiple years. Founded in 1996, our mission is to Help Heal Healthcare, working with hospitals and healthcare systems to drive margin to fuel their mission. For more information, please go to www.stratadecision.com.
Syntellis Performance Solutions, now part of Strata Decision Technology, provides innovative enterprise performance management software, data, and intelligence solutions for healthcare organizations. Its solutions include enterprise planning, cost and decision support, and financial and clinical analytics to elevate organization performance and transform vision into reality. More than 2,800 organizations and 450,000 users rely on Axiom, Connected Analytics, and Stratasan software. With an HFMA Peer Review designation for nearly a decade and No. 1 rankings from Black Book Research multiple years running, Syntellis helps healthcare providers acquire insights, accelerate decisions, and advance their business plans. For more information, please visit www.syntellis.com.
Sally Brown, Inkhouse