Surgery centers have always operated on razor-thin margins and found ways to thrive. Many hospitals and health systems are now forced to do the same.
Kaufman Hall reported the median operating margin for hospitals as of October was -0.5 percent, a 2 percent drop from September and a 13 percent decline year over year. Some health systems report larger negative margins, for example -3.3 percent for Cleveland Clinic.
Inflation and higher labor expenses are pinching health systems, with labor costs up 10 percent year over year. Even from September to October, labor expenses jumped 3 percent. Many health systems are providing overtime pay, salary bumps and bonuses in the competitive labor market.
Increased emergency department traffic could strain hospitals going forward if staff shortages continue, which would prevent admissions and lead to ED boarding, according to the report.
Health systems are focusing on cost cutting measures and tightening the revenue cycle to collect quicker, strategies all too familiar to ASCs. The financial constraint on hospitals and health systems is leading to more drastic measures as well, including closing service lines or shuttering operations all together. Health system mergers and acquisitions are also on the rise.
Consolidation in a market has led to higher healthcare costs in the past, a trend ASC owners are watching closely.