Hospitals Experiencing Effects of Inflation and End of Public Health Emergency

Hospital finances broke even in April amid a continuing trend of high expenses and the unwinding of the Medicaid continuous coverage requirement of the COVID-19 public health emergency (PHE), according to the latest National Hospital Flash Report from Kaufman Hall.

Median YTD Operating Margin Shows Slight Improvement

The median year-to-date (YTD) operating margin index for hospitals was 0.0% in April, up slightly compared to -0.3% in March. With operating margins remaining at or below zero, hospitals have been left with little financial flexibility.

PHE Unwinding Begins

Hospitals experienced increases in bad debt and charity care in April. Combined with decreased patient volumes, Kaufman Hall experts note these data could illustrate the effects of the start of widespread disenrollment from Medicaid following the end of the PHE and the continuous enrollment provision that accompanied it. As states continue the process of redetermination, these trends will likely continue.

“With states conducting their Medicaid eligibility redetermination, it’s predicted that hundreds of thousands of people will ultimately become uninsured,” said Erik Swanson, senior vice president of Data and Analytics with Kaufman Hall. “The data indicate that we may already be seeing the effects of disenrollment materialize with patients less likely to seek out the care they need and a continued rise in bad debt and charity care.”

Inflation Pressures Hospital Finances

High expenses have been placing added strain on hospitals as they try to recover from the challenges of the pandemic. Labor expense per adjusted discharge increased 3% in April from March, and the costs of goods and services continued to be well above pre-pandemic levels. While total expenses fell slightly in April, operating revenues declined at a faster rate, down 5% month-over-month.

“Hospital and health system leaders must figure out how to navigate the new financial reality and begin to take action,” said Swanson. “In the face of operating margins that may never fully recover and inflated expenses, developing and executing a strategic path forward to a future that is financially sustainable is crucial.”

The National Hospital Flash Report draws on data from more than 900 hospitals from Syntellis Performance Solutions.