CHICAGO – March 22, 2024 – Overall hospital finances showed ongoing signs of improvement in the second month of 2024, as both revenues and operating margins remained on the rise, according to new data from Syntellis Performance Solutions, now part of Strata Decision Technology.

The median year-to-date hospital operating margin rose to 6.4% in February, up from 5.2% in January and 2.3% in December. The recent margin gains can be attributed in part to several consecutive months of strong revenue performance, including double-digit gross revenue increases in February versus the same month in 2023.

However, the latest data also show that hospitals are struggling to rebuild vital cash reserves that have shrunk in recent years. The median change in days cash on hand increased just 0.6% from February 2023 to February 2024 for the average health system, but dropped 25.4% compared to February 2022. The decrease highlights continued financial uncertainties for the sector, as having lower cash reserves means hospitals are less prepared for emergencies or sudden market shifts, such as natural disasters or mass casualty events.

“U.S. hospitals have had a solid start to 2024, as key revenue, volume, and margin metrics continue to climb,” said Steve Wasson, chief data and intelligence officer with Strata Decision Technology. “At the same time, steep declines in cash reserves over the past two years represent a concerning risk. Without solid reserves, hospitals and health systems could quickly lose their footing in the face of unexpected market disruptions. Healthcare leaders will need to focus on rebuilding those reserves to help ensure greater financial stability for their organizations over the long term."

Persistent expense increases also remain a concern. Overall hospital expenses continued to rise year-over-year in February. Supply and drug expenses again had the biggest increases, with supply expense up 12.5% and drugs expense up 11.9% compared to February 2023, contributing to an 8.8% YOY increase in total non-labor expense as the industry continues to wrangle with the effects of inflation. Total labor expense rose 7.1% and total expense was up 7.8% YOY. Most expenses decreased after being adjusted for patient volumes. For February 2024 versus February 2023, total expense per adjusted discharge was down 2.5%, labor expense per adjusted discharge decreased 4.1%, and non-labor expense per adjusted discharge decreased 1.7%.

Hospitals saw patient volumes increase across most metrics compared to February 2023, but decrease month-over-month. Adjusted discharges jumped 11% YOY, but were down 1.1% versus January 2024. Emergency department visits increased 9.0% YOY and decreased 5.5% month-over-month, while operating room minutes rose 5.7% YOY and were down 3.3% month-over-month.

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