Q3 data shows Oregon hospitals finances hit by delta surge

Hospital finances were hit hard by the Delta surge in the third quarter ending in September of 2021, as the capacity crisis coupled with soaring costs associated with the staffing shortage continued to stress hospital operations, according to a newly released financial performance report from Apprise Health Insights.

“This fall, the data show a health care system that was pushed to the edge,” said Andy Van Pelt, CEO of Apprise Health Insights. “Hospitals have been under pressure from COVID for nearly 2 years. Oregon barely avoided a collapsed system in the fall, but we are still facing major  challenges just as the Omicron variant has led to some sobering projections for the new year.”

 

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The third quarter saw Oregon’s highest levels of hospitalization during the entire pandemic, with nearly 1,200 admitted patients on September 1. That’s more than double the previous peak of November 2020. Meanwhile, hundreds of patients awaited discharge every day, and sicker patients stayed in the hospital longer.

During the last week of November, 536 people were awaiting discharge: 381 patients in the hospitals facing discharge delays and another 155 patients were boarding in emergency departments.

The result in Q3 was a widening gap between net patient revenue (NPR) and total operating expenses (TOE). The high cost of labor continues to be a major contributor to big increases in TOE. Travel nurse expenses, which have some hospitals paying up to 700% of the hourly rate for staff nurses, are just one of the factors. Other labor costs such as purchased services for housekeeping and facility management add to TOE, which has risen 19% over the past three years while revenues have stayed flat. Longer hospital stays also have a negative impact on NPR, which for the fifth quarter in a row fell short of TOE.

The high cost of labor continues to be a major contributor to the large increases in Total Operating Expense. For Q3 2021, statewide Payroll and Employee Benefits is 52% of TOE, and has increased roughly 19% over the past three years.

Median operating margin figures declined from the second quarter of this year, with 45% of hospitals showing a negative operating margin in the third quarter. DRG hospitals (larger urban facilities) reported a -2.3% median operating margin.

The inadequate community placement for patients after hospital treatment, as well as longer than expected lengths of stay due to higher acuity, greatly affect hospital finances. Insurance companies, as well as Medicare and Medicaid, often stop reimbursing hospitals for care since payments are usually based on diagnoses, not on how long the patient remains in the hospital.

The data comes at a time when modeling from OHSU forecaster Peter Graven shows a surge of hospitalizations due to the Omicron variant, to about 1,650 by early February. If those projections come to pass, Apprise analysts say we can expect a repeat of Delta surge conditions, with staffing and bed shortages, continued high numbers of boarding and discharge delays, and the cancellation and deferral of thousands of elective (non-urgent but needed) procedures.

This report was compiled from information from a press release and the quarterly report produced by Appraise Health Insights.