Becker's Hospital Review

7 CFO / FINANCE Razor-thin hospital margins become the new normal By Alan Condon H ospital finances are starting to stabilize as razor-thin margins become the new normal, according to Kaufman Hall's latest "National Flash Hospital Report," which is based on data from more than 900 hospitals. External economic factors including labor shortages, higher material expenses and patients increasingly seeking care outside of inpatient settings are affecting hospital finances, with the high level of fluctuation that margins experienced since 2020 beginning to subside. Hospitals' median year-to-date operating margin was -1.1 percent in February, down from -0.8 percent in January, according to the report. Despite the slight dip, February marked the eight month in which the variation in month-to-month margins decreased relative to the last three years. "Aer years of erratic fluctuations, over the last several months we are beginning to see trends emerge in the factors that affect hospital finances like labor costs, goods and services expenses and patient care preferences," Erik Swanson, senior vice president of data and analytics with Kaufman Hall, said. "In this new normal of razor thin margins, hospitals now have more reliable information to help make the necessary strategic decisions to chart a path toward financial security." High expenses continued to eat into hospitals' bottom lines, with February signaling a shi from labor to goods and services as the main cost driver behind hospital expenses. Inflationary pressures increased non-labor expenses by 6 percent year over year, but labor expenses appear to be holding steady, suggesting less dependence on contract labor, according to Kaufman Hall. "Hospital leaders face an existential crisis as the new reality of financial performance begins to set in," Mr. Swanson said. "2023 may turn out to be the year hospitals redefine their goals, mission, and idea of success in response to expense and revenue challenges that appear to be here for the long haul." n Healthcare employment rebounds to pre- pandemic levels By Alexis Kayser C ontrary to widespread reports of staffing shortages, healthcare employment reached pre-pandemic levels with the addition of 44,200 jobs in February, according to a recent report from Altarum. A recent survey of hospital CEOs found that healthcare staffing was their top concern. Nurses nationwide have reported unsafe staffing levels, leading health systems to restructure and lawmakers to consider safe-staffing laws. Yet, healthcare currently has 1.3 percent more jobs than it did in February 2020, according to the monthly Health Sector Economic Indicators brief from Altarum. The nonprofit, healthcare-focused research and consulting organization analyzes available data on spending, prices, employment and utilization to craft the monthly report. The data holds that this isn't a new occurence. The sector has been adding — on average — 49,100 jobs per month for the past year, according to the brief. In February, hospitals led that growth, tapping 19,400 workers. Nursing and residential care facilities added 13,700 jobs, and ambulatory care settings added 11,100. However, as healthcare employment rises, its wage growth continues to decline and now lags behind economywide growth. Healthcare wage growth has been declining since mid-2022; in January, pay grew 4.2 percent year over year, while total private sector wage growth grew 4.4 percent. This statistic also defies industry narratives, as recent labor negotiations between unions and health systems have scored big raises for workers and clinicians. n Kaiser breaks ground on $298M expansion By Alan Condon O akland, Calif.-based Kaiser Permanente on March 24 broke ground on an inpatient tower with 138 beds at Roseville (Calif.) Medical Center, which serves about 360,000 healthcare members in the area. according to The Sacramento Bee. The 272,000-square-foot tower will have 138 beds — including 20 for the intensive care unit — and add 36 beds to an expanded emergency department. It will also feature six new operating rooms, a pharmacy and an expanded area for imaging and diagnostics. Construction costs for the tower were estimated at $298 million in 2022, according to The Bee. Kaiser is expected to spend about $1 billion for the overall project, which includes the inpatient tower, equipment, furnishings, infrastructure upgrades, design and parking facilities. The project is expected to be completed by 2027. n

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