Rising Patient Demand Drives Performance Gains for U.S. Hospitals but Cost Pressures Persist, According to New Strata Data
August 27, 2024
Larger Organizations See Slight Drop in Operating Margins
CHICAGO – August 27, 2024 – Many U.S. healthcare organizations saw revenues, patient volumes, and operating margins grow in July, even as expenses continued to climb, according to new data from Strata Decision Technology.
Hospital operating margins gained ground for the month, but health system operating margins staggered. The median year-to-date (YTD) hospital operating margin rose to 6.5% in July, up from 4.9% in June. For health systems, however, the median YTD operating margin narrowed from 2.3% in June to 2.1% in July.
“Improvements in hospital margins and patient volumes are a promising sign to start the third quarter, but the decline in health system operating margins coupled with double-digit growth in non-labor expenses such as drugs and supplies are concerning,” said Steve Wasson, chief data and intelligence officer at Strata Decision Technology. “The industry will not be able to build lasting stability until we rein in rising expenses.”
Hospital expenses continued to grow in July, with non-labor expense increases outpacing labor expense growth. Total hospital non-labor expense jumped 10.8% from July 2023 to July 2024, driven by a 17.3% year-over-year (YOY) increase in drugs expense, a 16.4% YOY rise in supply expense, and a 12% YOY increase in purchased services expense.
Total labor expense rose 5.7% YOY and total expense increased 8.2% YOY. Expenses eased somewhat after adjusting for patient volumes. Total expense per adjusted discharge was down 0.6% YOY and labor expense per adjusted discharge decreased 4.0% YOY, but non-labor expense per adjusted discharge increased 1.9% YOY.
Higher patient demand contributed to hospital operating margin gains in July. Patient volumes increased for the month after decreasing across most metrics in June. Outpatient visits rose 13.2% and inpatient admissions increased 8.2% from July 2023 to July 2024. Emergency visits and observation visits had minimal increases of 0.4% and 0.9% YOY, respectively.
At the same time, patient volumes decreased across many service lines and procedures. Breast health had the biggest YOY decrease at 8.7%, according to the latest service line data from June. Looking at 15 common procedure types, inpatient primary knee replacement surgeries had the biggest YOY decrease in patient volumes at 19.3%. Outpatient positron emission tomography (PET) had the only YOY increase, with patient volumes up 3.8%.
Higher patient demand contributed to gross revenue increases for the month. Gross operating revenue rose 13.9% from July 2023 to July 2024. Outpatient revenue increased 15.9% YOY and inpatient revenue was up 9.1% YOY.
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 a cloud-based, enterprise performance platform for software, and data and service solutions to help organizations better analyze, plan, and perform in support of their missions. More than 2,300 organizations rely on Strata’s StrataJazz and Axiom solutions for financial analytics, planning, and performance management. Named the market leader for Business Decision Support for more than 15 consecutive years, Strata delivers first-class solutions and service, with an intense focus on accelerating innovation. For more information, please go to www.stratadecision.com.
Syntellis Social Networks
LinkedIn: Strata Decision Technology
Media contact:
Sally Brown, Inkhouse
###