July 2018
Expense
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Expense by Region ?
Regionally, the West demonstrated almost no year-over-year change, resulting from opposing changes in unfavorable labor expenses and favorable non-labor expenses. The West also had an unfavorable increase in FTEs per AOB, reflecting an inability to fully flex with changing volumes when coupled with a decrease in adjusted patient days. The structural challenges in the West related to staffing will require those hospitals to continue to pursue advanced techniques in workforce optimization and building of flexible staff. The Northeast achieved labor efficiency similar to June 2017, but were well over budget, possibly due to year-end adjustments. Non-labor expense demonstrated a wide spread in performance, relative to both last year and to budget. These trends indicate that non-labor expenses continue to pose a challenge in affecting change and establishing 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
June was a good month from an expense perspective for hospitals and health systems nationwide. Total expense per adjusted discharge was on par with last year and under budget. All other components of expense demonstrated similar trends: making improvements over last year and being under budget, but showing increases from the prior month (with the exception of drug spend, which increased year over year). As June concluded the fiscal year for many hospitals, the year-over-year improvements may reflect tighter cost controls throughout the year, while the monthly uptick may represent some last-minute spending of unused budget. As mentioned, drug expenses continued to increase and will be a continuing source of pressure for hospitals, reflecting the importance of improving drug utilization strategies.
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
-4%
1%
0%
img_1807_Total_Expense_Box.svg
Labor Expense per Adj. Discharge
-6%
3%
-2%
img_1807_Labor_Expense_Box.svg
FTEs per AOB
-1%
2%
-4%
img_1807_FTE_Expense_Box.svg
Non-Labor Exp per Adj. Discharge
-2%
1%
-5%
img_1807_Non_Labor_Expense_Box.svg
Supply Expense per Adj. Discharge
-5%
2%
-7%
img_1807_Supply_Expense.svg
Drug Expense per Adj. Discharge
-6%
4%
2%
img_1807_Drug_Expense_Box.svg
Purchased Service Exp per Adj. Discharge
-4%
1%
-9%
img_1807_Purchased_Service_Expense_Box.svg
By Region
By Bed Size
National Observations
Expense by Bed Size
Many of the expense metrics demonstrated a tighter distribution when viewed from various bed size cohorts, indicating that there are some clear regional differences in how hospitals of similar bed sizes are managed. Total expense per adjusted discharges were relatively tightly clustered around “no change” from last year. Small hospitals were the exception, reflecting their cost structure dependence on assumed volumes. The tight clustering also demonstrates that many hospitals are relying on prior year performance for budgeting, and are averse to drastically changing operations (i.e., unit types, unit sizes, care specialties) from one year to the next. This indicates many hospitals, regardless of bed size, are focused more on cost control than revenue growth. Purchased services and supply expenses were slightly below last year, continuing the trend from May. Historically, purchased service expenses increase at the beginning of each fiscal year. Next month’s issue will explore if this trend holds true for those hospitals entering their fiscal year 2019.
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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