The economic outlook for hospitals remains bleak, according to the July 2023 data on hospital financial performance from Kaufman Hall.

Kaufman Hall’s newest Physician Flash Report, with data through the second quarter of 2023, found that provider productivity for medical groups continues to increase, with net patient revenue per provider FTE up 10% from a year ago.

However, this productivity was not enough to offset rising expenses as the median investment/subsidy per provider still rose 5% year-over-year to $224,243. The total direct expense per provider full-time equivalent (FTE) reached $611,519, a 4% increase compared to Q2 2022.

They report that most hospitals underperformed in June as high expenses and economic pressures persist. As margins continue to stabilize on the surface, the gap between high-performing hospitals and those struggling in this new “new normal” is widening.

Key takaways from the July 2023 National Hospital Flash Report are:

– – Hospital margins underperformed in June, compared to the previous month. Despite an overall trend of continued improvement, most hospitals underperformed slightly compared to May. Fiscal year-end accounting adjustments may have also contributed to the performance bump in June.
– – Average lengths of stay continue to decrease, and emergency department visits are down. Patient volumes continue to stabilize, and increases in outpatient revenue indicate people are continuing to shift away from inpatient settings.
– – Bad debt and charity care are increasing. Hospitals are being affected as states step up efforts to redetermine Medicaid eligibility and more people are disenrolled.
– – Inflation continues to challenge hospitals’ performance. Supplies and purchased service expenses remain high. Decreases in labor expenses may indicate higher staff turnover and even reductions in workforce.

“This ‘new normal’ is an incredibly challenging environment for hospitals,” Erik Swanson, senior vice president of Data and Analytics with Kaufman Hall, said in a statement. “It’s time for hospital and health system leaders to begin developing and implementing a strategy for long-term sustainability, including expanding their outpatient footprint and re-evaluating where finite resources are being utilized.”

“As labor continues to be the largest share of expenses, health systems need to think strategically about provider employment models,” said Matthew Bates, managing director and Physician Enterprise service line lead with Kaufman Hall. “Organizations that want to see performance improvement must figure out how best to effectively integrate advanced practice providers into the care team model.”