Declining Profit Margins

April 25, 2023

 

Currently in the U.S., hospitals have been seeing abysmal profit margin numbers. A recent research report showed that since the start of the pandemic, many hospitals are operating at a loss. There are many systemic causes, ranging from labor shortages and costs, supply chain issues for equipment, and the general increased costs in every facet of the economy due to inflation.

Why are hospitals facing declining profit margins, and what are some solutions that could help turn this around?

On the latest episode of RCMchat, host Michelle Dawn Mooney chatted with two senior team members from AGS Health, Leigh Poland, Vice President of Coding Service Line, and Ashish Kumar Aggarwal, Senior Vice President of Operations and Process Excellence, about the subject. On the show the two discussed with Mooney the cause and effect that has led to hospitals seeing declining profit margins and several solutions that can help remedy the downward trend.

Mooney, Poland, and Aggarwal also talked about the pandemic’s role in declining margins and also …

  1. Reasons for why labor costs are also rising
  2. How older patients and patients with chronic conditions have increased healthcare demands
  3. Other contributing factors that are playing a role in the declining profit margins

“We all understand that U.S. hospitals are operating with negative margins. We are seeing that healthcare costs overall are also increasing. The costs are increasing much higher than the inflation rate, which is prevailing in U.S. market now, which means that hospitals are spending more on supply, equipment, and personnel. Recently, there is a trend that insurance companies — they are reducing reimbursements, which further decrease the hospital revenues,” said Aggarwal.

Poland echoed Aggarwal, and added that hospitals are seeing more patients with acuity, who likely didn’t receive adequate care for their condition during the pandemic. She also stated that one of many solutions hospitals can utilize is performing vendor reviews, and embracing more technology.

“I would definitely be looking at those technology solutions. I think there’s a lot of fear about technology and fear that it has that potential to eliminate jobs, but what that technology has the ability to do is, for those jobs where technology is impacting their quality and their production, it opens up those team members to do more advanced functions within their space. So, don’t fear technology. It’s a tool — it’s a wonderful tool, and if used effectively, it really can impact those products and quality numbers,” said Poland.

Leigh Poland is the Vice President of Coding Service Line at AGS Health. She’s been with the company for a decade and has worked in revenue management for over 20 years.

Ashish Kumar Aggarwal is the Senior Vice President of Operations and Process Excellence at AGS Health. He’s been with the company for over eight years now and has 27 years of global delivery experience and is certified in project management.

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