U.S. Hospitals See Operating Margins Improve Even as Expenses Continue to Grow, According to New Syntellis Performance Solutions Data

Drug expenses remain on the rise, driving up hospitals’ non-labor costs

CHICAGO – Dec. 21, 2023 – U.S. hospitals saw operating margins improve in November, but escalating expenses — including rising drug expenses — remain a concern as 2023 draws toward a close, according to new data from Syntellis Performance Solutions, now part of Strata Decision Technology.

The median hospital operating margin took a step up, rising to 2% for the month after holding steady at 1.6% in September and October. November marked the ninth month of positive operating margins as hospitals work to recover from more than a year of negative results, including dismal margin performance throughout 2022. 

“The operating margin increase is a positive sign for our nation’s hospitals, indicating potential stabilizing of hospital finances close to the year’s end,” said Steve Wasson, chief data and intelligence officer with Strata Decision Technology. “Even with several months of sustained positive results, operating margins appeared unsteady in recent months due to persistent expense increases. It remains to be seen how rising drug costs and other expense pressures will affect margin performance heading into 2024.”

Drug expenses had the biggest increase in November compared to other expense areas, continuing trends highlighted in the latest Syntellis Performance Trends report which featured data on rising per-patient and per-prescription drug expenses despite decreasing drug volumes. The November data show total drug expense jumped 9% year-over-year (YOY), while supply expense was up 6.7% and purchased service expense rose 2.3% over the same period.

Total non-labor expense increased 5.1% from November 2022 to November 2023 and total labor expense rose 2.4% YOY, pushing total expense up 3.8% YOY. While labor expenses remain high, non-labor expense increases have outpaced labor expense growth YOY for the past eight months as hospitals contend with inflation and other expense pressures.

At the same time, hospitals continued to see revenue gains, particularly for outpatient services. Gross operating revenue jumped 7.7% YOY, driven by a 9.2% YOY increase in outpatient revenue and a 4.5% YOY rise in inpatient revenue. November was the seventh consecutive month of YOY growth for the three revenue metrics. Month-over-month, however, gross operating revenue decreased 2.5%, inpatient revenue was down 2%, and outpatient revenue dropped 3.1%.

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.   

About Syntellis 

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.  

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Media contact: 

Sally Brown, Inkhouse