Medicaid unwinding and fewer outpatient procedures squeeze hospitals

By Adriel Bettelheim / August 29, 2023     

Hospitals' financial performance worsened in July due to a summertime drop in outpatient business and ongoing Medicaid redeterminations in more than 30 states, the consultancy Kaufman Hall said in its latest industry report.

The big picture: While there was some improvement in operating margins compared to last year, bad debt and charity care as a percentage of hospitals' gross operating revenue rose 7% from June to July.

• Labor remains the biggest share of hospital expenses, and costs will likely continue to fluctuate due to inflation, the report said.

Between the lines: The unwinding of Medicaid coverage in more than half of the states is leaving many patients uninsured and less likely to get the care they need.

That's accompanied by a decline in volume on the outpatient side, possibly due to patients not opting to get elective procedures during the summer.

By the numbers: The median year-to-date operating margin index for hospitals was 1.3% in July, down slightly from 1.4% in June.

• Adjusted discharges per calendar day decreased 7% from the previous month.

• The lower patient traffic led to a decline in expenses, but not enough to offset revenue losses, Kaufman Hall said.

• The report draws on data from more than 1,300 hospitals across the country.

Looking ahead: Hospitals are still struggling to discharge patients to post-acute care due to lack of space in many facilities. Those hospitals that develop ongoing relationships with local nursing homes to reduce patients' length of stay tend to perform better, experts said.

• "Identifying steps that can ensure a smooth transition, such as obtaining prompt pre-authorizations and planning discharge early, will help organizations reduce expenses and improve patients' experience," said Erik Swanson, senior vice president of data and analytics with Kaufman Hall.