By HFT Staff

Hospital operating margins fell 16.5 percent in 2021 without CARES Act funding compared to pre-pandemic levels as a result of increases in labor and non-labor expenses of 19 percent and 20 percent, respectively, from December 2020 and continued low patient volumes, according to the latest edition of Syntellis Performance Trends.

The report confirms that healthcare providers nationwide felt the pains of labor shortages, global supply chain challenges and continued COVID-19 surges throughout 2021 in the form of escalated expenses, unstable volumes, narrowed operating margins and higher overall care costs. The trends also point to a likelihood that those pressures will continue in 2022, with some expected to worsen. 

The report also includes insights from leading consulting firms Kaufman Hall and Huron. 

“Building and maintaining long-term financial stability will require healthcare leaders to be flexible and prepare for many possible future scenarios,” says Steve Wasson, executive vice president and general manager of data and intelligence solutions at Syntellis. “To understand the changes to healthcare’s financial landscape clearly, leaders need to track KPIs in real time so they can identify opportunities for improvement and make informed planning decisions.” 

One area where expenses skyrocketed was hourly rates for healthcare workers. Amid the Great Resignation, hospitals and physician practices are offering more competitive pay to retain or attract the necessary workforce. This finding was most evident this past year in nursing: Many organizations were forced to rely heavily on contract and travel nurses to make up for deficient staffing levels, pushing median hourly rates for contract registered nurses as high as $100 per hour in November 2021 before dropping to $71 per hour in December, still a 12.7 percent year-over-year increase compared to December 2020. 

Many other healthcare professionals also experienced significant pay increases, with higher hourly pay hikes in 2021 compared to previous years. Respiratory therapists, who remain in high demand due to the prevalence of respiratory conditions among COVID-19 patients, saw hourly rates jump 10.3 percent from 2019 to 2021. 

“Regardless of how well health systems are managing their employees’ worked hours versus volume, attrition and heavy use of agency staff will add 30 percent plus cost to the labor expense,” says Matthew Thompson, managing director at Huron. “Organizations must understand that employees have options and move to innovative ways to source, grow, and retain talent. A measured and dedicated focus on culture will be a must. Non-traditional approaches for recognition and rewarding employees will become a baseline standard. Forming partnerships and strategies to drive talent to the organization, instead of passively hoping to attract talent, will be critical.” 

Labor challenges are especially difficult in facilities and departments where volumes are peaking. Despite hospital volumes remaining below pre-pandemic levels throughout the year, Urgent Care Visits increased June-December 2021 and peaked at 46 percent in August, as volumes followed a similar pattern to U.S. COVID-19 case trends. Median Pediatric ICU Patient Days climbed steadily throughout much of 2021 and ended the year up 35 percent compared to December 2020, but down 10 percent compared to 2019 overall. 

“The continuing — and in many ways intensifying — economic challenges of COVID threaten the ability of America’s hospitals and health systems to make greatly needed investments for long-term competitiveness and improved community health,” said Kenneth Kaufman, chair of Kaufman Hall, a Syntellis strategic alliance partner.