Health System Operating Margins Decline and Hospital Patient Demand Lags in August, According to New Strata Data
September 25, 2024
Expense Increases Slow Compared to Double-Digit Increases in July
CHICAGO – Sept. 25, 2024 – Performance metrics were mixed for many U.S. healthcare organizations in August, with patient demand stalling as expenses continued to rise, according to new data from Strata Decision Technology.
Health systems nationwide saw operating margins narrow again for the month. The median year-to-date (YTD) health system operating margin dropped from 2.1% in July to 1.9% in August. At the same time, the median YTD operating margin for hospitals rose slightly from 4.8% in July to 4.9%.
“This is the second consecutive month that we’ve seen operating margins tighten for the nation’s health systems,” said Steve Wasson, chief data and intelligence officer at Strata Decision Technology. “As our largest healthcare organizations, these entities already struggle with thin operating margins and feel expense pressures on a magnified scale. While it’s encouraging to see expense increases slow somewhat compared to the concerning spikes in July, they remain on the rise with no signs of stopping.”
Hospital operating margins saw minimal change compared to the prior year, with the median change in hospital operating margin rising just 0.9 percentage point from August 2023 to August 2024. Margin changes varied by region, with hospitals in the Northeast/Mid-Atlantic seeing the biggest decrease at 1.1 percentage point year-over-year (YOY), and hospitals in the South seeing the biggest increase at 1.9 percentage points.
Patient volumes dropped across most key metrics for the month, representing a return to declines seen in June after a rise in patient demand in July. Outpatient visits decreased 0.5%, observation visits were down 4.2%, and emergency visits decreased 4.9% YOY. Inpatient admissions increased for the month at 3.5% YOY. From July to August 2024, inpatient admissions decreased 0.7% but outpatient visits rose slightly, up 0.4%.
Looking at patient volumes across different service lines, infectious disease had the biggest YOY increase at 20.5%, due in part to recent increases in cases of pertussis, COVID-19, and other infectious diseases reported by the Centers for Disease Control and Prevention. Patient volumes were mixed for the nation’s children’s hospitals. From August 2023 to August 2024, inpatient admissions increased 1.4% while outpatient visits decreased 5.4%.
Hospital expense increases eased somewhat compared to double-digit increases in July. Non-labor expenses rose faster than labor expenses for the month, with total non-labor expense up 6.2% YOY and total labor expense up 5.4% YOY. Total expense increased 6.2% from August 2023 to August 2024. Looking at specific non-labor expenses, supply expense was up 5.5% YOY compared to a 16.4% YOY increase in July. Drugs expense increased 4.6% YOY in August versus 17.3% YOY the prior month, and purchased service expense rose 12.0% YOY, the same level as in July.
Hospital revenues continued to rise across most metrics. Gross operating revenue and inpatient revenue both increased 6.1% YOY while outpatient revenue was up 5.6% YOY. By region, increases in gross operating revenue ranged from 4.6% YOY for hospitals in the Northeast/Mid-Atlantic to 7.0% for those in the Midwest.
Read Strata’s Monthly Healthcare Industry Financial Benchmarks to learn more.
About the Data
This report uses data from Comparative Analytics and Strata’s StrataSphere® database. Comparative Analytics offers access to near real-time data drawn from more than 135,000 physicians from over 10,000 practices and 139 specialty categories, and from 500+ unique departments across more than 1,600 hospitals. Comparative Analytics also provides data and comparisons specific to a single organization for visibility into how their market is evolving. StrataSphere is a unique and comprehensive data-sharing platform that helps providers leverage the power of a network that represents approximately 25% of all provider spend in U.S. healthcare. This report incorporates data from more than 600 hospitals from over 120 health systems with StrataJazz® Decision Support, as reported in the National Patient and Procedure Volume TrackerTM.
About Strata Decision Technology
Strata Decision Technology, LLC provides an innovative, cloud-based platform for software, and data and service solutions to help healthcare organizations acquire insights, accelerate decisions, and enhance performance in support of their missions. More than 2,300 organizations rely on Strata’s StrataJazz and Axiom solutions for market-leading service and enterprise performance management software, data, and intelligence solutions. To learn more about Strata and why the company has been named the market leader for Business Decision Support for more than 15 consecutive years, please go to www.stratadecision.com.
Syntellis Social Networks
LinkedIn: Strata Decision Technology
Media contact:
Sally Brown, Inkhouse