Hospital performance plummeted during Omicron’s January peak

March 1, 2022

January was a devastating month for hospitals and health systems nationwide hit full force by Omicron’s wave, according to the latest report from Kaufman Hall.

Their latest National Hospital Flash Report found that hospital margins, outpatient volumes, and revenues all dropped while expenses rose, as COVID-19 cases and hospitalizations peaked at record levels mid-month due to rapid spread of the highly contagious variant.

Actual hospital margins dropped into the negative numbers, with the median Kaufman Hall Operating Margin Index at -3.68% for the month, not including Coronavirus Aid, Relief, and Economic Security (CARES) Act funding. With the federal aid, it was -3.3%.

The median change in Operating Margin (without CARES) dropped 71.3% from December to January due to persistent expense increases and abrupt volume shifts. Year-over-year, the median change in Operating Margin was down 23.7%, not including CARES. With CARES, the median change in Operating Margin declined 80.7% month-over-month and 23.8% year-over-year.

“Our nation’s hospitals and health systems had a very difficult month to start the year,” said Erik Swanson, a senior vice president of Data and Analytics with Kaufman Hall. “While COVID-19 cases have swiftly declined since peaking in mid-January, the effects of the sudden and sizable margin and outpatient volume declines will be felt throughout 2022.”

Many providers and patients delayed nonurgent, outpatient care to mitigate spread of Omicron and reserve hospital resources for those with more urgent needs. Operating Room Minutes dropped 15.7% month-over-month and 20.4% compared to January 2020. At the same time, an increase in seriously ill patients requiring longer hospital stays pushed Patient Days up 1.7% and Average Length of Stay up 8.6% from December to January.

The delays in outpatient care led to corresponding revenue declines. Outpatient Revenue dropped 7.5% from December to January, dragging Gross Operating Revenue (without CARES) down 4.7% month-over-month despite a 2.7% increase in Inpatient Revenue over the same period.

Escalating expenses continued to hit hospitals as nationwide labor shortages heighten wage pressures and global supply chain issues coupled with inflation affect non-labor expenses. Total Expense per Adjusted Discharge jumped 11.6% from December to January, largely driven by a 14.6% month-over-month increase in Labor Expense per Adjusted Discharge. Non-Labor Expense per Adjusted Discharge rose 7.8% month-over-month in January.

Kaufman Hall release

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