Hospital Operating Margins Down 15% As Tight Competition for Healthcare Workers Drives Up Hourly Rates, According to Syntellis Performance Trends Report
The latest monthly report from Syntellis Performance Solutions a leading provider of innovative enterprise performance management software, data and analytics solutions for healthcare organizations — released finds that hospital operating margins are down 15% compared to October 2020 as factors such as The Great Resignation, supply chain issues and the long-term impact of the COVID-19 pandemic converge to drive up expenses.
“The current trends are not sustainable for the nation’s hospitals, health systems, and physician groups. Particularly as we face new variants and another potential surge, healthcare leaders will need to find better solutions to address widespread labor shortages, strengthen recruitment and retention, and control rising labor and non-labor expenses.”
November’s edition of Syntellis Performance Trends, which analyzes data from more than 1,000 hospitals and 135,000 physicians from over 10,000 practices and 139 specialty categories, reveals how nationwide labor shortages are driving up hourly wages across healthcare, especially in high-demand areas heavily affected by the COVID-19 pandemic, such as respiratory care.
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Respiratory therapists saw the greatest increase in pay, with hourly rates jumping 11.5% in October compared to the same period in 2019. That is more than triple the 3.7 percent increase in hourly rates seen for physical therapists over the same period, reflecting high demand for respiratory therapists as providers work to care for rising numbers of patients suffering short- and long-term respiratory effects of the COVID-19 virus. Hourly rates for registered nurses (RNs) are also on the rise across departments, with increases of 8 to 8.7 percent. Healthcare providers are struggling to fill positions and are raising pay to compete for a tight labor pool as workers resign due to pandemic-related burnout and an abundance of other opportunities.
“Retaining and recruiting top talent is more than paying higher wages,” said Tonia Breckenridge, managing director at Huron, a global consultancy. “Healthcare organizations need to put an emphasis on rewarding and recognizing top performers in ways that are meaningful, including creating a safe environment. Engaging top performers to solve for the issues we face today will have long term impact in redesigning the care model for the future.”
Additional findings from the latest Syntellis Performance Trends include:
- Medical supply costs are escalating — due in part to global supply shortages. Medical supply expense per unit of service has steadily risen since the start of the pandemic for departments that interact with COVID-19 patients, but those increases have picked up in recent months. This increase is most stark in respiratory care, where medical supply expense per unit of service has increased almost 56% since October 2019.
- Revenues remain on the rise. Gross Operating Revenue was up 9.3% in October versus October 2020 and 7.6% compared to October 2019. Inpatient Revenues rose 10.2% year-over-year versus 2020 and 11.8% year-over-year versus 2019. Outpatient Revenue grew at a slower rate, up 8.6% compared to October 2020 and 5.8% compared to October 2019.
- Inpatient volume increases are waning. Hospitals continued to see increases in inpatient volumes in October, but the rate of growth was down compared to recent months. Patient Days rose 6% year-over-year versus both October 2020 and October 2019. That follows an 11.4% year-over-year bump the prior month versus September 2020. Adjusted Discharges were flat compared to October 2020.
- Staffing levels are dropping. Support Staff FTEs per 10,000 wRVUs fell -7.6% from 2020 levels, according to the annualized October results. Compared to 2019 levels, however, Support Staff FTEs per 10,000 wRVUs were down just -1.4%. The declines clearly show that factors other than staffing levels are inciting rising physician expenses.
“Our findings in this month’s report reflect the continued repercussions of the pressures of the pandemic, including labor shortages and supply chain issues, on providers and the industry overall,” said Steve Wasson, EVP and General Manager, Data and Intelligence Solutions at Syntellis. “The current trends are not sustainable for the nation’s hospitals, health systems, and physician groups. Particularly as we face new variants and another potential surge, healthcare leaders will need to find better solutions to address widespread labor shortages, strengthen recruitment and retention, and control rising labor and non-labor expenses.”
Syntellis’ Axiom Healthcare Suite enables best-practice financial planning to streamline processes and prepare for the future. The company’s Axiom™ Comparative Analytics provides in-depth analyses and benchmark data for industry leaders that can be customized into specific peer groups – such as by specialty, practice size or region – or broken out by individual providers.