News: Hospital margins continue to stabilize but remain below pre-pandemic levels, data shows

In March of this year, the median year-to-date operating margin index for hospitals was flat, though it did show a small improvement from February, according to data released by Kaufman Hall. The report says slow steps toward stability are being made while organizations still face high expenses and economic pressures, leaving hospitals in a vulnerable position if a recession or public health crisis were to occur. The data showed expenses in March still outpaced revenue growth, HealthLeaders reported.

Part of these challenges comes from inflation and the rise of non-labor expenses, such as drug and supply costs which increased by 6% from February. The total direct expense per provider full-time equivalent (FTE) saw a 17% rise in the first quarter of 2023. A 12% year-over-year increase in median investment/subsidy per provider FTE to $236,842 also occurred in this quarter, which the report states is due to increased costs of materials and labor.

“As labor pressures continue, we’re seeing more and more reliance on advanced practice providers—including nurse practitioners and physician associates,” said Matthew Bates, managing director and physician enterprise service line lead with Kaufman Hall, in the report. “Two of every three providers that will enter the workforce this year will be an advanced practice provider. Provider groups that hire, retain, and deploy this corner of the workforce most effectively will see the most success in the long-term.”

Editor’s note: To read HealthLeaders’ coverage of this story, click here. To read the Kaufman Hall report, click here.