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2018 Year-In-Review
Expense
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Expense by Region ?
Expense performance was mixed across the country in 2018, with Total Expense per Adjusted Discharge increasing in the Northeast, Midwest, and West regions. Supply expenses grew for all regions except the South, and Drug Expense per Adjusted Discharge increased for all regions. FTEs per AOB fell for most regions, except the West and Northeast (although the Northeast’s increase was almost negligible). Worsening labor efficiencies in the West demonstrate the challenges in flexing staffing down with volumes, as many hospitals in that region face mandated ratios and Family and Medical Leave Act (FMLA) policies that make flexing more difficult. Hospitals in the West need to consider how to employ more advanced approaches to labor management.
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
At a national level, expense indicators performed unfavorably in 2018 relative to 2017, but these trends were offset by strong revenue performance. That being said, the overall changes in expense performance were modest. This indicates that the cost curve is bending, as more and more hospitals implement cost containment plans. Total Expense per Adjusted Discharge had no year-over-year increase compared to 2017, and Labor Expense per Adjusted Discharge increased only slightly. Given the declining volumes discussed previously, these trends indicate better control of expenses in the context of volume pressures. FTEs per AOB decreased substantially—indicating that improving labor efficiencies was a major focus for hospitals in their 2018 cost control plans. Drug Expense per Adjusted Discharge continued to rise, but remained slightly below budget expectations.
Unless noted, figures are Actuals and Medians
Budget Variance
Year Over Year
Year Over Year Distributions (click to enlarge)
Total Expense per Adj. Discharge
(2.0%)
0.0%
total.svg
Labor Expense per Adj. Discharge
(2.6%)
0.2%
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FTEs per AOB
(1.5%)
(1.7%)
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Non-Labor Exp per Adj. Discharge
(0.5%)
0.7%
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Supply Expense per Adj. Discharge
(4.3%)
2.4%
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Drug Expense per Adj. Discharge
(5.3%)
1.1%
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Purchased Service Exp per Adj. Discharge
(2.0%)
(2.2%)
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By Region
By Bed Size
National Observations
Trends
Expense by Bed Size
Year-over-year expense performance across most bed-size cohorts aligned with unfavorable trends seen at the national level. Total Expense per Adjusted Discharge increased the most for 200-299 bed hospitals, indicating that this cohort has a particularly difficult time adjusting cost structures to external changes.
Labor
Non-Labor
Supply
Drug
Purchased Service
FTE/AOB
Labor Expense
Non-Labor Expense
Supply Expense
Drug Expense
Purchased Service Expense
FTE per AOB
Expense Trends
Expense trends for 2018 demonstrated mostly unfavorable performance, but—as previously mentioned—the rate of unfavorable performance is declining. Total Expense per Adjusted Discharge saw a slight increase in the rate of change throughout the year, while the rate of increase remained flat for Labor Expense per Adjusted Discharge. FTEs per AOB declined throughout the year, but the rate of improvement slowed, likely indicating that traditional labor management methods are reaching their peak. Hospital leaders will need to think more innovatively on how to manage expenses in the future. Non-labor expense indicators continued to be unfavorable, and drug expenses continued to increase at a rate of around 4 percent compared to 2017.
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
Trends
©2018 Kaufman, Hall & Associates, LLC
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