New data shows that the financial margins for hospitals and physician groups leveled off in the second quarter of 2024, despite high costs for drugs and labor.
Healthcare providers are standing on much steadier ground than they were last year. The median year-to-date operating margin among health systems held steady at 2.3% in June for the second month in a row, according to a new report from Strata Decision Technology.
The report is based on data from more than 135,000 physicians and more than 1,600 hospitals.
It showed that hospitals’ gross revenues are in a better place than they were last year, but these figures have dropped from May to June. Hospitals’ gross operating revenue increased to 3.6% from June 2023 to June 2024, with inpatient revenue and outpatient revenue rising by 4.7% and 1.8%, respectively.
Growth in labor expenses outpaced growth in non-labor expenses last month — a turnaround from May, when hospitals finally began to see some decreases in supply and drug costs.
From June 2023 to June 2024, providers’ labor expenses grew by 5.2% while their non-labor costs rose by 3.3%, which resulted in a 4.8% increase in overall expenses during the 12-month period.
At the same time, patient volumes decreased. Outpatient visits saw the sharpest decline, with patient volumes dropping by 10.2% in June compared to May.
Patient volumes for outpatient visits have gone down by 4.2% since June 2023, the report showed. In the past year, patient volume levels have also decreased slightly for both emergency and observation visits. Inpatient admissions, on the other hand, saw a small increase of 1.4% in year-over-year patient volumes.
“Hospital and health system operating margins leveled off in recent months, even as expenses rose and patient volumes declined in June. While overall financial performance for these critical healthcare organizations has strengthened compared to recent years, they continue to experience significant market volatility, said Steve Wasson, chief data and intelligence officer at Strata Decision Technology.
The report also showed that growing expenses are still a major concern for physician practices across the nation.
The median total expense per physician was $1.08 million for the second quarter of 2024 — a 16.3% increase from the second quarter of last year and a 2.1% increase from the first quarter of this year. When broken down by region, figures varied. The year-over-year increase was lowest among practices in the Midwest region at 13.6% and highest among practices in the West at 21.3%.
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