Hospitals and health systems are seeing some signs of stabilization and margin improvement, but challenges around workforce, expenses and patient access persist according to Kaufman Hall’s 2023 State of Healthcare Performance Improvement report.

Patient access to care is a growing concern as hospital and health system leaders work to figure out what sustainable operations look like following a complete transformation in how patients interact with the healthcare system and providers. The report found that 66% of respondents’ institutions have run at less than full capacity at some point during the past year due to shortages, and 32% of respondents say that patient concerns or complaints about access to physicians are increasing.

“Having enough healthcare workforce to meet patient demand continues to be one of the most pressing concerns for hospitals and health systems,” said Kaufman Hall Managing Director Lance Robinson, leader of the firm’s performance improvement practice. “It’s clear that for many, this is a long-term issue. The older generation of providers is moving into retirement without a robust talent pipeline in place to fill the gaps retirees leave behind.”

However, one area that is showing improvement is the utilization of contract labor, which appears to be declining. Only 4% of organizations are experiencing increased utilization of contract labor, compared to 27% last year. Almost all surveyed (98%) are pursuing one or more recruitment and retention strategies, including raising starting salaries or the minimum wage (90%).

Kaufman Hall experts expect that it will be a slow climb for hospitals to return to the 3-4% operating margins that help ensure long-term sustainability. While staffing and capacity issues have clear implications for revenue, an increased rate of claims denials—reported by 73% of respondents—has had the most significant impact on hospitals’ revenue during the past year.

“Healthcare leaders must assess the realities of this new environment and begin making the strategic decisions and investments necessary to improve operations, or risk not being able to meet the care needs and preferences of their patients,” said Robinson.

Other report highlights include:
Patients are increasingly seeking care in outpatient settings, as almost half of respondents say that volumes for outpatient surgery and provider clinics are above pre-pandemic levels.
Despite the ongoing labor crisis, no respondents believe that their organization has fully optimized the automation technologies it has invested in.
Supply chain issues have improved, but nearly three-quarters of survey respondents are still encountering distribution delays.
The Kaufman Hall State of Healthcare Performance Improvement report is an annual publication that analyzes the performance improvement and cost transformation efforts of hospitals and health systems. This year’s results are based on survey responses from 106 hospital and health system leaders nationwide, including representatives from all regions of the country as well as from urban, suburban and rural markets.

###

About Kaufman Hall
Kaufman Hall provides management consulting solutions to help society’s foundational institutions realize sustained success amid changing market conditions. Since 1985, Kaufman Hall has been a trusted advisor to boards and executive management teams, helping them incorporate proven methods, rigorous analytics, and industry-leading solutions into their strategic planning and financial management processes, with a focus on achieving their most challenging goals.

Kaufman Hall services use a rigorous, disciplined, and structured approach that is based on the principles of corporate finance. The breadth and integration of Kaufman Hall advisory services are unparalleled, encompassing strategy; financial and capital planning; performance improvement; treasury and capital markets management; mergers, acquisitions, partnerships, and joint ventures; and real estate.