Hospitals’ financial performance improved during the first four months of the year, outperforming the same period in 2024, according to research released this week by Kaufman Hall.
The consulting firm analyzed data from 1,300 hospitals across the nation. The report found that hospitals’ average operating margin was 3.3% from January to April, up from 1.4% in May of last year.
Hospitals’ financial improvement across the first four months of this year is due to rising patient volumes and more efficient patient throughput, the report said. Discharges per calendar day increased by 3% year over year, and the average length of stay dipped by 3% year over year.
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As a whole, hospitals are getting more serious about addressing bottlenecks in the patient transfer and discharge processes, noted Brian Pisarsky, managing director at Kaufman Hall.
“Volume is great, but how do we improve that throughput side of it to accommodate that volume as it comes in? That has been the challenge of many organizations,” he declared.
Emergency department crowding remains a major issue for many hospitals. Pisarsky said he regularly talks with hospitals that have 25-75 patients being held in the emergency department daily, waiting for inpatient beds — even at large facilities with more than 1,000 beds.
But success stories are starting to emerge as hospitals take steps to solve this issue, he added. There is no silver bullet that can solve health systems’ throughput challenges, but hospitals are using a mix of strategies to manage patient flow and length of stay, Pisarsky explained.
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For example, they’re placing case managers in emergency departments, as well as creating emergency department-managed observation units to avoid sending patients upstairs, which helps reduce length of stay. Healthcare staff are also conducting multidisciplinary rounds and increasing collaboration between departments like emergency, inpatient units, surgery and transfer centers, Pisarsky said.
“We have one client that decreased their length of stay so much that they have actually closed a unit in their facility. Their volume is up 10% over last year, but their length of stay has decreased enough to do that, and they’re managing patients quicker and better. So it does work,” he stated.
While hospitals’ margins are stable for now, it’s important to remember that they’re still quite vulnerable — with non-labor costs being the next major headwind, added Erik Swanson, another managing partner at Kaufman Hall.
Labor cost growth is slowing, but non-labor expenses increased by 8% during the first four months of this year compared to the same period last year. Swanson said that supply chain disruptions and rising costs for goods will become a more pressing financial challenge as the year goes on.
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