Labor Shortages, Rising Expenses and Supply Chain Challenges Contribute to 16.5% Decrease in Hospital Operating Margins in 2021

CHICAGO – February 1, 2022 – Today, Syntellis Performance Solutions — a leading provider of innovative enterprise performance management software, data and intelligence solutions — published its latest edition of Syntellis Performance Trends, which reveals how the healthcare industry fared in 2021 compared to both 2020 and pre-pandemic levels. The report found that hospital operating margins fell -16.5% in 2021 (without CARES Act funding) compared to pre-pandemic levels as a result of increased labor and non-labor expenses (up 19% and 20%, respectively, from December 2020) and continued low patient volumes.

The comprehensive year-in-review edition of Syntellis Performance Trends analyzes data from more than 1,000 hospitals and 135,000 physicians from over 10,000 practices and 139 specialty categories. The report confirms that healthcare providers nationwide felt the pains of labor shortages, global supply chain challenges, and continued COVID-19 surges throughout 2021 in the form of escalated expenses, unstable volumes, narrowed operating margins, and higher overall care costs.

The trends also point to a likelihood that those same pressures will continue in 2022, with some expected to worsen in the coming months. Providing additional context to this data, the report also includes insights from leading consulting firms Kaufman Hall and Huron.

“Building and maintaining long-term financial stability will require healthcare leaders to be flexible and prepare for many possible future scenarios,” said Steve Wasson, EVP and General Manager, Data and Intelligence Solutions at Syntellis. “To understand the changes to healthcare’s financial landscape clearly, leaders need to track KPIs in real time so they can identify opportunities for improvement and make informed planning decisions.”

One area where expenses skyrocketed was hourly rates for healthcare workers. Amid the “Great Resignation,” hospitals and physician practices are offering more competitive pay to retain or attract the necessary workforce. This was most evident this past year in nursing: many organizations were forced to rely heavily on contract and travel nurses to make up for deficient staffing levels, pushing median hourly rates for contract registered nurses as high as $100 per hour in November 2021 before dropping to $71 per hour in December, still a 12.7% year-over-year increase compared to December 2020.

Many other healthcare professionals also experienced significant pay increases, with higher hourly pay hikes in 2021 compared to previous years. Respiratory Therapists, who remain in high demand due to the prevalence of respiratory conditions among COVID-19 patients, saw hourly rates jump 10.3% from 2019 to 2021.

“Regardless of how well health systems are managing their employees’ worked hours versus volume, attrition and heavy use of agency staff will add 30% plus cost to the labor expense,” said Matthew Thompson, Managing Director at Huron, a global consultancy. “Organizations must understand that employees have options and move to innovative ways to source, grow, and retain talent. A measured and dedicated focus on culture will be a must. Non-traditional approaches for recognition and rewarding employees will become a baseline standard. Forming partnerships and strategies to drive talent to the organization, instead of passively hoping to attract talent, will be critical.”

Labor challenges are especially difficult in facilities and departments where volumes are peaking. Despite hospital volumes remaining below pre-pandemic levels throughout the year, Urgent Care Visits increased June-December 2021 and peaked at 46% in August, as volumes followed a similar pattern to U.S. COVID-19 case trends. Median Pediatric ICU Patient Days climbed steadily throughout much of 2021 and ended the year up 35% compared to December 2020, but down 10% compared to 2019 overall.

“The continuing — and in many ways intensifying — economic challenges of COVID threaten the ability of America’s hospitals and health systems to make greatly needed investments for long-term competitiveness and improved community health,” said Kenneth Kaufman, Chair of Kaufman Hall, a Syntellis strategic alliance partner.

The report also paints a picture of the state of the healthcare industry, outlining changes in expenses by category, patient volumes and days, gross operating revenue trends, and how physician productivity levels have adjusted to meet demand. To explore the full findings of the Syntellis Performance Trends report, please visit this page.

Syntellis’ Axiom™ Healthcare Suite enables best-practice financial planning to streamline processes and prepare for the future. The company’s Axiom™ Comparative Analytics solution provides in-depth analyses and benchmark data for industry leaders that can be customized into specific peer groups – such as by specialty, practice size or region – or broken out by individual providers.

About Syntellis Performance Solutions

Syntellis Performance Solutions provides innovative enterprise performance management software, data and analytics solutions for healthcare organizations. Its solutions include enterprise planning, cost and decision support, and financial and clinical analytics tools to elevate organizational performance and transform vision into reality. With over 2,800 organizations and 450,000 users relying on its Axiom and Connected Analytics software, combined with No. 1 rankings from Black Book Research and an HFMA Peer Review designation for six consecutive years, Syntellis helps healthcare providers acquire insights, accelerate decisions and advance their business plans. For more information, please visit www.syntellis.com.