August 2018
Expense
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Expense by Region ?
Evaluating total expense per adjusted discharge, all regions performed below their budget and below their prior year’s actual performance, with one exception. The West region performed below budget but above the prior year’s actual performance. The West region also was the only region with unfavorable increase in FTEs per AOB, again reflecting an inability to flex with changing volumes. Pursuing advanced techniques in staffing and building a flexible pool for variable staff will greatly help to remedy this issue.
Non-labor expense per adjusted discharge was below or equal to budget for all regions, and below the previous year’s actuals for all regions with the exception of the Northeast/Mid-Atlantic. Supply expense per adjusted discharge and drug expense per adjusted discharge demonstrated a wide spread in performance relative to both the budget and prior year. This indicates that non-labor expenses continue to be a challenge to affect change, as well as establish accurate budgets in an environment of declining volumes.
Labor
Non-Labor
Supply
Drug
Purchased Service
FTE/AOB
Labor Expense
Non-Labor Expense
Supply Expense
Drug Expense
Purchased Service Expense
FTE per AOB
National Expense Observations
Similar to June, July was a good month from an expense perspective. Total expense per adjusted discharges were down when compared to this year’s budget and the previous year’s actual expenses. The other components of expense—with the exception of drug expense per adjusted discharge—also were down compared to this year’s budget and the previous year’s actual expenses. Drug expense per adjusted discharge was below this year’s budget but slightly greater than the previous year’s actual expenses.

As July is the first month of the new fiscal year for many hospitals, the strong budget and year-over-year improvements likely reflect immediate cost control initiatives hospitals are conducting to start the new year strong. As we mentioned last month, drug expense continued to increase from the prior year, and will be a continual source of pressure of hospitals, reflecting the importance of strategies to improve drug utilization, and manage the additional expense related to shortages.
Unless noted, figures are Actuals and Medians
Budget Variance
Month Over Month
Year Over Year
Year Over Year Distributions
(Click to enlarge)
Total Expense per Adj. Discharge
-10%
1%
-7%
Labor Expense per Adj. Discharge
-7%
1%
-10%
FTEs per AOB
-3%
0%
-6%
Non-Labor Exp per Adj. Discharge
-11%
-1%
-5%
Supply Expense per Adj. Discharge
-9%
0%
0%
Drug Expense per Adj. Discharge
-12%
1%
2%
Purchased Service Exp per Adj. Discharge
-12%
-6%
-12%
By Region
By Bed Size
National Observations
Expense by Bed Size
For all hospitals below 500 beds, total expense per adjusted discharge was below both the budget and prior year’s actual expense. This also seems to be a theme in labor expense per adjusted discharge and FTEs per AOB as well. This indicates that the largest hospitals have the greatest inflexibility when it comes to changes in volume. The highest performing hospitals—when compared to budget and prior year’s actual—are those with the least amount of beds. Because they are smaller, they are inherently better able to manage swings in volume.
Non-labor expense per adjusted discharge shares a similar result to labor expense per adjusted discharge—all hospitals with less than 500 beds were below both the budget and prior year’s actual expense. Hospitals with 500 or more beds were below budget, but greater than the prior year. When evaluating supply expense per adjusted discharge and drug expense per adjusted discharge, the results were widespread. But again, smaller hospitals had the strongest performance, while mid- to larger-sized hospitals struggled.
Labor
Non-Labor
Supply
Drug
Purchased Service
FTE/AOB
Labor Expense
Non-Labor Expense
Supply Expense
Drug Expense
Purchased Service Expense
FTE per AOB
By Region
By Bed Size
National Observations
©2018 Kaufman, Hall & Associates, LLC
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