Since the start of the Covid-19 Pandemic, financial indicators for Critical Access Hospitals have changed noticeably. The following statistics are from the CAH Financial Indicators Report for 2019, 2020, and 2021 provided by the Flex Monitoring Team. The Flex Monitoring Team is a consortium of the Rural Health Research Centers located at the Universities of Minnesota, North Carolina at Chapel Hill, and Southern Maine.

Operating Margins + Total Margins

US Critical Access Hospitals' (CAH) operating margins increased from .72% to 10.90%, and total margins increased from 2.40% to 13.11%. The increase in these margins indicates total expenses are less than total revenues, including grant funds from the Payroll Protection Program and Provider Relief Funds provided during 2020 and 2021.

Days Cash on Hand + Net AR Days

As a result of the grant funds received, days cash on hand for US CAHs increased from 71.23 days to 164.81 days from 2019 to 2021. The net AR days for US CAHs stayed consistent, reducing slightly from 50.54 days in 2019 to 48.91 days in 2021.

Average Salary per FTE + Salaries to Net Patient Revenue

The average salary per FTE increased by 10% from 2019 to 2021, rising from $61,605 in 2019 to $67,766 in 2021. However, operating revenue increased 29.97% from 2019 to 2021, outpacing the three-year increase in expenses of 16.02%. Another positive trend from the increased net patient service revenue from 2019 to 2021 was the salaries to net patient revenue ratio, which decreased from 45.39% to 44.37%.

2022 + 2023 Expectations

All the financial indicators presented above depict strong profitability and liquidity ratio improvements from 2019 to 2021, with total revenues increasing significantly over costs. The expectations for 2022 and 2023 are not as favorable. With inflation driving supply and professional services cost significantly higher, along with the labor cost increases seen over the past two years, profitability and liquidity ratios are expected to decrease. In addition, labor shortages continue to challenge the ability to generate sufficient revenue to counteract the increase in operating expenses.

Hospital management and boards will be challenged during the remainder of 2023 and beyond with cost containment, labor shortages, third-party payment changes, and patient service offering changes. An increased focus on cost containment, revenue cycle management, employee recruitment and retention, payor contract negotiation/analysis, and patient service offering analysis will be essential over the next year to combat the increase in operating expenses and protect the increase in cash position realized at the end of 2021. To learn more about Lutz’s healthcare services for CAHs, please contact us.