Illustration: Eniola Odetunde/Axios
Hospitals' operating margins are moving back into positive territory as patients flock to outpatient clinics and labor costs start to decline, a new Kaufman Hall report finds.
Why it matters: It's another sign the industry's fortunes are improving post-pandemic, which could bolster congressional efforts to change the way Medicare pays health systems.
Driving the news: May marked the third month in a row when facilities recorded positive operating margins (the percentage of revenue kept as profit). The year-to-date operating margin index stood at 0.3%, up from 0.1% the previous two months and considerably higher than 2022, when many facilities were operating in the red.
- Revenue from outpatient care is growing at a much faster pace than inpatient care revenue, the report shows.
- Labor expenses, which spiked dramatically during the pandemic, are beginning to decrease as well.
- The new report validates findings in a Cowen survey of nonprofit hospitals that found revenue growth accelerated in May.
Reality check: Margins are still well below pre-pandemic levels, but things look much more positive than they did in 2022.
- Patients are becoming comfortable with inpatient care, with discharges, emergency department visits and operating room minutes all climbing, the Kaufman Hall report says, although modestly on a year-to-date basis.
What we're watching: The positive trend could weigh on insurers, Modern Healthcare reported, stoking investor fears some health plans may not be prepared for a surge in utilization.
- Big insurers like UnitedHealth will announce second-quarter earnings in the coming weeks, providing more insight into health care utilization so far this year.