Recent data indicates that the financial margins for hospitals and physician groups have stabilized in the second quarter of 2024, despite ongoing high costs for drugs and labor. The improved financial performance is reflected in the median year-to-date operating margin among health systems, which held steady at 2.3% in June for the second consecutive month, according to a new report from Strata Decision Technology.
Based on data from over 135,000 physicians and more than 1,600 hospitals, the report reveals that hospitals’ gross revenues are in a better position than the previous year, with a 3.6% increase in gross operating revenue from June 2023 to June 2024. Inpatient revenue saw a 4.7% rise, while outpatient revenue increased by 1.8%. However, growth in labor costs outpaced that of non-labor costs last month. Specifically, from June 2023 to June 2024, labor expenses grew by 5.2% compared to a 3.3% rise in non-labor expenses, culminating in an overall expense increase of 4.8% during the same period.
Despite these financial gains, patient volumes have declined, particularly in outpatient visits, which dropped by 10.2% in June compared to May and by 4.2% year-over-year. Even emergency and observation visits have seen slight decreases in the past year. In contrast, inpatient admissions experienced a minor increase of 1.4% in year-over-year patient volumes.
Steve Wasson, Chief Data and Intelligence Officer at Strata Decision Technology, commented on the situation by saying, “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.”
Physician practices are also grappling with rising expenses. The median total expense per physician was $1.08 million for the second quarter of 2024—a 16.3% increase compared to the same period last year and a 2.1% rise from the first quarter of this year. The year-over-year increases varied by region, with the Midwest experiencing a 13.6% increase and the West seeing a 21.3% rise in expenses.
For more detailed insights, you can read the full report here.