What You Should Know:
– U.S. hospitals and health systems continued to experience positive financial performance in April, with patient demand and revenues rising for the 12th consecutive month, according to new data from Strata Decision Technology.
– While hospitals and health systems experienced positive financial performance in April, rising expenses remain a concern. Continued monitoring of these trends will be crucial for understanding the overall health of the healthcare industry.
Key Findings:
- 12th Consecutive Month of Revenue Growth: Gross hospital revenues saw double-digit increases across both inpatient and outpatient services, marking the 12th consecutive month of year-over-year (YOY) growth. Outpatient revenue led the way with a 15.3% increase, reflecting the ongoing demand for convenient outpatient care.
- Steady Operating Margins: The median hospital operating margin remained stable at 4.7% for a second month, indicating healthy financial performance despite rising expenses.
- Increased Patient Volumes: Patient volumes also rose across most measures, with outpatient visits experiencing the highest YOY increase (12.9%). Inpatient admissions were flat month-over-month but up 9.7% YOY, partly due to the expansion of the Two-Midnight Rule.
- Rising Expenses: While revenues and volumes grew, hospitals faced continued pressure from expense increases. Total non-labor expense saw the biggest increase (10.5% YOY), driven by significant rises in supply (16.7%) and drugs (14.9%).
Hospital Performance Benchmarks:
- Operating Margins: The median year-to-date operating margin remained at 4.7% for the second consecutive month. However, hospitals saw a 4.2 percentage point increase in the median change in operating margin from April 2023 to April 2024.
- Expenses: Total non-labor expense had the biggest increase (10.5% YOY), driven by rising supply and drug costs. Total labor expense increased 4.1% YOY, while total expense was up 7.4% from April 2023.
- Revenues: Gross hospital revenues experienced double-digit YOY growth in both inpatient and outpatient services. Outpatient revenue rose 15.3%, and inpatient revenue increased 11.7%, pushing overall gross operating revenue up 14.1% YOY.
- Patient Volumes: Outpatient visits saw the highest YOY increase (12.9%), followed by emergency visits (3.3%) and observation visits (0.8%). Inpatient admissions were flat month-over-month but up 9.7% YOY.
Physician Practice Benchmarks:
- Expenses: Physician practice expenses continued to rise, with the median total direct expense per physician FTE reaching $1.05 million for April annualized. This represents an 11.4% increase from 2023.
- Revenues: Physician net revenue per FTE also increased, reaching $725,614 for April annualized, representing a 13.4% increase from 2023.
- Productivity: Higher physician productivity, measured by physician work relative value units (wRVUs) per FTE, likely contributed to the revenue increase. The annualized metric rose to 6,350.95 for the month, up 9% from the previous year.
“Hospitals and health systems continue to see encouraging financial performance as we head into the second quarter of the year,” said Steve Wasson, chief data and intelligence officer at Strata Decision Technology. “The data indicate that many healthcare leaders are finding effective strategies to navigate persistent high expenses. They are successfully moving their organizations to more stable ground and away from narrower margins that plagued hospitals throughout 2023.”