Hospital operating margins are trending upward as hospitals begin to bounce back from the Covid-19 pandemic, according to consulting firm Kaufman Hall’s latest National Hospital Flash Report.
The median hospital margin was 3.3% in October, which is just behind the most recent highest figure of 4.4% in June followed by 3.5% in August. These numbers are up from -1.3%, according to the report, which used data from more than 1,300 US hospitals.
In addition to improved margins, Kaufman Hall analysts found that hospital emergency department visits declined in October 2023 compared to the previous month.
The decline “likely reflects the shift in patient behavior to outpatient care,” Erik Swanson, SVP of data and analytics at Kaufman Hall, wrote in the report.
The Covid-19 pandemic drove a decline in emergency room visits as patients delayed care and avoided hospitals unless absolutely necessary. Now, patients are increasingly choosing to go to physician offices first, Kaufman Hall found.
“I’m not sure ED volumes will ever go back to where they were, at least on a case mix or a percent-of-population level,” Mark O’Bryant, president and CEO of the Florida-based Tallahassee Memorial HealthCare, told Kaufman Hall.
Outpatient care is “one of the fastest-growing and highest-margin segments of the healthcare industry,” according to a 2020 McKinsey report.
To continue improving their operating margins, hospitals need to “think like consumer-facing organizations and better quantify the impact their relationship with consumers has on their business model,” according to Swanson.
“Hospitals [that] have adopted patient-focused measures have used them to improve patient satisfaction, increase patient access, and enhance marketing strategies,” he wrote.
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