U.S. Hospitals See Finances Stabilize in Late 2023 Even as Expenses Rise, According to New Syntellis Performance Solutions Data
Hospital operating margins rise to 2.3% in December after starting the year in the red
CHICAGO – Jan. 29, 2024 – U.S. healthcare organizations closed 2023 on more stable footing as they sought to rebuild financial health following a very difficult year in 2022, but expense challenges persist, according to new, year-end data from Syntellis Performance Solutions, now part of Strata Decision Technology.
The median, year-to-date operating margin rose to 2.3% in December. It was the second consecutive month of increases for the metric — which represents actual, median operating margin for hospitals nationwide. It also marked a 10th consecutive month of positive operating margins despite unsteady performance, including narrow margins throughout the year and a rocky start in January and February.
“2023 was a year of recovery for our nation’s hospitals and health systems as organizations worked to climb out of the red after more than 12 months of negative operating margins that ended in March 2023,” said Steve Wasson, chief data and intelligence officer with Strata Decision Technology. “While they made headway with revenue and margin gains, persistent expense pressures continue to slow progress.”
Hospitals saw persistent expense increases throughout 2023, with year-over-year increases occurring each month of the year for total, total non-labor, and total labor expenses. Total non-labor expense — which encompasses categories like drugs, supplies, and purchased services — had the biggest increase for 2023 overall, rising 5.5% versus 2022 as hospitals felt the ongoing impacts of inflation and other expense pressures. Total expense increased 3%, while total labor expense was up 0.7% from 2022 to 2023.
Outpatient demand grew significantly in 2023, leading to a 9.8% jump in hospital outpatient revenue compared to the prior year as patients continue to opt for more convenient services. Gross hospital operating revenue was up 7.4% and inpatient revenue rose 3.4% over the same period.
Physician practices felt the weight of rising expenses as 2023 drew to a close. The latest data from more than 135,000 physicians showed that per-physician expenses — measured as total direct expense per physician full-time equivalent (FTE) — surpassed $1 million for the fourth quarter of 2023, for a double-digit increase over the same period in 2022. The metric rose to $1,012,164 for the quarter, marking a 6.4% increase compared to Q3 2023 and a 13.1% jump from Q4 2022.
High expenses contributed to an increase in investments needed (above physician revenues) to support physician practice operations, measured as median investment per physician FTE. The metric rose 2.5% compared to Q3 2023 and 8% versus Q4 2022 to $285,773 for the fourth quarter of 2023.
Read Syntellis’ latest Monthly Healthcare Industry Financial Benchmarks report to learn more.
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. 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, Syntellis helps healthcare providers acquire insights, accelerate decisions, and advance their business plans. For more information, please visit www.syntellis.com.
Sally Brown, Inkhouse