Healthcare providers’ operating margins declined in November due to lower patient demand levels and persistent increases in expenses, according to a report released this week by Strata Decision Technology.
Hospitals saw notable decreases in patient demand during November. Outpatient visits declined by 13.5% from the month prior, emergency visits dropped by 12.1% and inpatient admissions fell by 6.6%.
There was also a downward trend for hospitals’ year-over-year patient volume change. Emergency visits went down by 7.6%, outpatient visits decreased by 0.6% and inpatient admissions declined by 0.3%.
The year-over-year decreases in patient demand are concerning, but they should be viewed in context of recent years, noted Steve Wasson, Strata’s chief data and intelligence officer.
Last year, hospitals were still experiencing a resurgence in patient volumes in the aftermath of the pandemic, he pointed out.
“The decreases across key metrics from November 2023 to November 2024 indicate that patient volumes are stabilizing following the volatility of the last few years. It should be noted that the year-over-year declines in both inpatient admissions and outpatient visits were relatively small at 0.3% and 0.6%, respectively, which further supports the idea that these metrics are stabilizing,” Wasson explained.
He anticipates that December’s data will show an increase in patient volumes.
Healthcare providers often see an uptick in patient demand in December, as individuals schedule routine exams or elective care to get the most out of their health insurance benefits before year’s end, Wasson noted.
However, he doesn’t think expenses will be decreasing anytime soon for hospitals.
“We saw some cooling of labor expense increases in 2024 as many organizations reduced their reliance on contract staffing firms, after demand for contract workers surged from 2019 to 2022. At the same time, inflation drove up the pace of non-labor expense increases in 2023 and much of 2024, particularly for drugs, medical supplies and purchased services,” Wasson stated.
Hospitals’ three core metrics concerning their expenses — total expense, total labor expense and total non-labor expense — have all seen year-over-year increases each month for the past 14 months, he added.
While Wasson expects hospitals’ revenue growth to continue, he thinks the pace of this growth will slow in 2025 as expense pressures mount.
“Hospitals saw gross revenues grow year-over-year across both inpatient and outpatient metrics for the past 19 consecutive months, but the pace of that growth has slowed in recent months compared to double-digit increases seen earlier in 2024,” he pointed out.
He also highlighted that over the past 12-month period, median health system operating margins have fluctuated from a low of 1.5% in January 2024 to a high of 2.3% in June 2024.
During the last three months, this metric has held relatively steady at 1.7% — and Wasson said this metric likely won’t change very much in the coming months as hospitals’ revenue growth decelerates and expenses continue to climb.
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