Last year was generally a year of financial improvement for hospitals, with profitability in 2018 demonstrating growth in operating margin of about 5 percent compared to 2017, and outperforming budget by 4.4 percent, according to a new Kaufman Hall analysis.
But increasing their volumes is still a struggle for hospitals, and they underperformed in that area last year as compared to 2017.
The underperformance in volume was a trend that held nationally for the most part, with discharges remaining steadily in decline. Unfavorable performance in emergency department visits continued to accelerate, and while adjusted discharges and adjusted patient days increased, the increase slowed last year compared to 2017.
This declining hospital performance comes as payment is shifting to outpatient care settings. Government reimbursement is also growing, and the government tends to pay hospitals less than commercial insurers.
Another complicating factor is the emergence of retail disruptors -- companies like Amazon, Walmart and CVS that are seeking to establish lower-cost care options that could potentially siphon business away from traditional healthcare settings.
Hospitals have responded to this existential threat by merging and consolidating to leverage scale, hoping to gain a better handle on their market share, as well as adding more outpatient services. But if the findings are accurate, those efforts have yet to bear significant fruit.
Finance and operations executives need to act proactively in analyzing whether their institutions are in distress and, if so, form strategies to improve conditions that turn around their performance.
Financial distress is the term used to describe organizations struggling to pay creditors, investors and employees and that report sustained periods of losses that might evolve into bankruptcy and ultimate closure.