October 2018
Expense
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Expense by Region ?
Hospital expense performance in most regions was favorable to both budgets and prior year performance in recent months, typically falling in the lower left quadrant in Total Expense per Adjusted Discharge. In September, however, unfavorable performance at the national level—due to an increase in volume variability—also was seen at the regional level. Most regions performed unfavorably to budget and to prior year. The Midwest was the exception, performing favorably to the prior year, but unfavorably to budget.
A similar trend occurred in Labor Expense per Adjusted Discharge, with all of the regions falling to the same quadrants as they did in Total Expense per Adjusted Discharge. Reviewing FTE per AOB, the Northeast/Mid-Atlantic, Midwest, and South all were slightly unfavorable to budget and the prior year. The West also was unfavorable to budget, but highly unfavorable when compared to the prior year.
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
The months of July and August were very strong across the board for expense management. Metrics such as Total Expense per Adjusted Discharge, Labor Expense per Adjusted Discharge, FTEs per AOB, and others were all favorable at the national level when compared to budget and the prior year's performance. This performance likely was reflective of a combination of certain organizations' narrow focus on starting their new fiscal year strong, and below-average, low-variability patient volumes.
Patient volumes tended to decrease and feature greater variability in September, as organizations were a few months removed from keeping as close an eye on their budgets. As a result, September was the first time in several months where Total Expense per Adjusted Discharge, Labor Expense per Adjusted Discharge, FTEs per AOB, and Non-Labor Expense per Adjusted Discharge were unfavorable compared to budget. All of these metrics also were unfavorable when compared to the prior year's actual performance, with the exception of FTEs per AOB. This is indicative of organizations' inability to budget and align operations that flex with fluctuations in patient volumes. Looking forward, the late-Fall to early-Winter months historically display increased variability.
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
3.7%
5.8%
3.0%
Labor Expense per Adj. Discharge
4.6%
6.4%
3.3%
FTEs per AOB
1.7%
1.5%
(2.2%)
Non-Labor Exp per Adj. Discharge
2.5%
5.9%
3.6%
Supply Expense per Adj. Discharge
(0.1%)
2.4%
4.4%
Drug Expense per Adj. Discharge
(4.2%)
5.0%
1.0%
Purchased Service Exp per Adj. Discharge
0.4%
5.2%
2.1%
By Region
By Bed Size
National Observations
Expense by Bed Size
National and regional trends in September relative to expense performance also held true for hospitals across various bed sizes. In recent months, hospitals with less than 200 beds generally performed favorably to both budget and the prior year, appearing to adapt to variable patient volumes. That changed in September, however, illustrating that hospitals with lower bed counts are susceptible to the same inflexibility issues seen in larger organizations.
Reviewing Total Expense per Adjusted Discharge, organizations of all bed sizes performed above budget for September. Hospitals with 200-299 beds operated near budget, but roughly 5 percent greater than the prior year. Surprisingly, hospitals with 500 or more beds only just exceeded budget and prior year actuals. Results were scattered across other expense metrics. Depending on bed size, hospitals may be using different approaches to budget and forecast Non-Labor, Supply, Drug, and Purchased Service expenses. Hospitals with 200-299 beds appear to be the best forecasters, as they were below budget in all of these areas.
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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