September 7, 2022

The Current State of Hospital Finance

Today, the majority of hospitals and health systems in the U.S. are still trapped in the post-pandemic recovery phase, in terms of finance and operations. Read on to find out more about the current state of hospital finance.

Despite increasing advancements in Revenue Cycle technology and improved policy implementations, many hospitals are still struggling financially. Several surveys on healthcare finance trends in the U.S from 2020 through 2021 and even now in 2022 show statistics that carry significant implications for health systems and hospitals' economic and operational wellbeing.

While the healthcare industry continues to recover from the ravages of the COVID-19 pandemic, hospitals must also find practical and effective ways to navigate the leading issues in finance and revenue cycle management (RCM) which were apparent prior to the pandemic and will persist well after this year. According to a publication by CommerceHealthcare, leaders in healthcare will primarily be burdened with accelerating financial recovery, expanding RCM automation, and achieving digital payments, among other pressing demands moving forward.

For many of America's most essential health systems, the year 2022 has proven to be another year of financial recovery and regaining financial stability. Hospital finances did see a brief relief early on in the year but are unfortunately hurting again as health systems experience declining patient volumes, lower revenues, and negative operating margins.

Current Trends in Hospital Finance

Declining Patient Volumes

One of the largest challenges hospitals currently face is the decline in patient volumes. Compared to the first two quarters of 2021, patient visits have declined 5.7% month-over-month this year, which has continued to affect cash inflows.

Despite being up 8.6% year-to-date, even Emergency Department (ED) Visits have shown dips in the majority of months this year when compared to last year's numbers.

There has also been a decrease in the average length of stay (LOS), which also hasn't helped matters.

Dropping Revenue and Increasing Expenses

All of these factors have led inpatient and outpatient hospital revenues to drop by 7% since March for over 900 sampled hospitals.

Kaufman Hall’s National Hospital Flash Report also showed expenses at those same  hospitals have continued to rise since the beginning of the year.

According to Erik Swanson, the senior vice president of data and analytics at Kaufman Hall, “The first [couple of quarters] of 2022 have been challenging for the nation’s hospitals and health systems, which has been borne out in the losses many providers have reported so far this year. Even if margins return to pre-pandemic levels, many hospitals may end the year with substantially depressed margins.”

Decrease in Average Hospital Operating Margins

According to Kaufman Hall’s National Hospital Flash Report, the first three months of the year shared the same median operating margin of -3.09%.

Coming off a year like 2021 where more than a third of hospitals maintained negative operating margins, more must be done to prevent this continuing spiral.

Finding Money in Unexpected Places

Recovering dollars from unexpected revenue sources could be a solution as hospitals look to stabilize margins and improve them moving forward.

Third-party liability (TPL), which makes up over five percent of hospital's overall accounts receivable (A/R) is a great example. With hospitals losing millions each year giving free or uncompensated care to patients who later get reimbursed from legal actions the hospital's never told about, optimizing Third-party liability recovery could help hospitals and their Revenue Cycle Management teams achieve the margins they desire.

Many of these potential revenue streams are difficult for hospitals to establish alone, consequently leading to annual losses of millions that would otherwise go towards hospitals' budget. Successfully adjudicating TPL claims for instance, requires specialized knowledge, immense time and nowadays, specific technologies. With experienced partners like Discover Claims who have developed the data-driven tools to find more patient settlements in less time, hospitals may be able to finally enjoy some respite as they deploy strategies that enable them to track and recover on thousands of TPL claims automatically.

Final Thoughts

Studies have shown that hospitals that are better off financially can maintain highly reliable systems and provide ongoing resources for quality improvement. In contrast, financially unstable hospitals and health facilities struggle in these areas. Also, your hospital revenue inflow can be impacted by numerous factors, such as patient case complexity, commercial vs. government insurance reimbursement, the inability of hospitals to navigate third-party liability, mounting patient financial pressures, and many other factors.

However, hospitals and health systems can still navigate these trends to grow their financial stability post-pandemic. For instance, your hospital management can leverage emerging technological advancements in RCM/finance automation and squarely address insurance challenges such as those related to TPL. 

To learn more about automated solutions, contact us at Discover Claims and see how you can further optimize your Revenue Cycle processes and maximize revenue.

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