Becker's Hospital Review

14 CFO / FINANCE Hospital margins improve to 1.4% By Alan Condon T he median year-to-date operating margin index for hospitals improved to 1.4 percent in June, according to Kaufman Hall's latest "National Flash Hospital Report," which is based on data from more than 1,300 hospitals. Fiscal year-end accounting adjustments contributed to a slight increase in performance, but most hospitals underperformed in June as high expenses and economic headwinds persist, according to the report. As margins appear to stabilize on the surface, the gap between high-performing hospitals and those that are financially struggling may be widening. However, financial challenges — such as the rising costs for labor, drugs and supplies — have begun to stabilize, allowing health systems time to implement strategies to return to profitability, according to Kaufman Hall. The proportion of full-time equivalents per adjusted occupied beds also decreased 8 percent from May, suggesting higher levels of workforce reductions and staff turnover as hospitals start taking the steps needed to survive, according to Kaufman Hall. Physician and provider productivity for medical groups is also in the rise, with net patient revenue per provider FTE up 10 percent from a year ago, as patients increasingly seek care in outpatient settings, Kaufman Hall's "Physician Flash Report" found. But this increase was not enough to offset rising expenses as the median investment/subsidy per provider rose 5 percent year over year to $224,243. Total direct expense per provider FTE hit $611,519 in the second quarter, a 4 percent year-over-year increase. "This 'new normal' is an incredibly challenging environment for hospitals," Erik Swanson, senior vice president of data and analytics with Kaufman Hall, said. "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." n to an end, only one-third of whom will be eligible for Marketplace subsidiaries," said Ms. ompson. 3. CMS will drop new technology add-on payments for several technologies next year, which the agency estimates will decrease pay by $364 million. CMS will also end new COVID-19 treatment add-on payments when the program expires Sept. 30. 4. Graduate medical education payments will change in the new rule to support training for Medicare providers in rural areas. Rural hospitals can now serve as training sites for Medicare GME payments aer becoming rural emergency hospitals. 5. CMS added 15 new health equity hospital categorizations for the 2024 final rule and is prioritizing the CMS Framework for Health Equity 2022-2032 to expand data collection, reporting and analysis. 6. Starting in 2024, CMS will change the regulations for individuals eligible for benefits by section 1115 demonstrations for Medicaid beneficiaries to include only patients who receive health insurance that covers inpatient hospital services or premium assistance covering 100 percent of the premium costs to patients from the demonstration. "We are also disappointed that CMS finalized its proposal to limit the inclusion of patient days for patients who are regarded as eligible for Medicaid benefits under a Section 1115 demonstration project for purposes of the Medicare DSH calculation," said Ms. ompson. "is policy could have a devastating impact on access to care for lower-income patients by curtailing much needed resources used to finance health care in historically marginalized communities." 7. CMS clarified it will only consider physician-owned hospital expansion exception requests from eligible hospitals under the rural provider exception. e final rule also reinstated restrictions on the frequency of physician-owned hospital expansion exception requests, maximum expansion and location of the expansion, which had been removed in 2021. 8. CMS adopted three new measures, removed three measures and modified three measures for the Hospital IQR Program. e three measures added are related to electronic clinical quality reporting for pressure injuries, acute kidney injuries, excessive radiation dose or inadequate image quality for adult CT scans. CMS removed the hospital-level risk standardization complication rate aer elective primary total knee and hip replacements; Medicare spending per beneficiary hospital measure; and the elective delivery of babies before 39 weeks gestation. 9. e Medicare Promoting Interoperability Program for eligible hospitals and critical access hospitals changed in the final rule for next year. CMS will define the EHR reporting period in the 2025 calendar year as a minimum of any continuous 180-day period within the calendar year, among other changes. 10. CMS will establish a validation reconsideration process for hospitals that failed to meet requirements of the Hospital-Acquired Condition Reduction Program, which will begin in the 2025 fiscal year. 11. Hospitals participating in the Hospital Value-Based Purchasing Program will also see changes next year. CMS finalized the proposal to adopt the severe sepsis and sepsis shock management bundle measure beginning in the 2026 fiscal year and reward excellent care in underserved populations through a health equity scoring change. CMS is also adopting proposed changes to the data submission and reporting requirements of the HCAHPS survey beginning in the 2027 fiscal year, among other modifications. n

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