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Analysis

Hospital Margins Improve in June, Volumes Off

By John Commins  
   August 06, 2020

Even with CARES Act money, Kaufman Hall reports YTD operating margins are about -50% compared with 2019.

The nation's hospitals saw improving margins in June despite the coronavirus pandemic, thanks to billions of dollars in federal aid, aggressive cost cutting, and the stutter-step return of non-urgent surgeries and procedures

However, volumes remained down for hospitals of all sizes, according to Kaufman Hall's latest National Hospital Flash Report.

The thickening margins are a welcomed sign for hospitals that had seen a historic drop off in revenues during the second quarter, owing to the pandemic.

However, much of the improvement could be credited to hundreds of billions of dollars in federal aid doled out under the Coronavirus Aid, Relief, and Economic Security (CARES) Act, which Kaufman Hall said propped up Operating Margins and Operating Earnings Before Interest, Taxes, Depreciation, and Amortization (EBITDA) Margins.

"On a year-to-date basis, hospitals are still well below their historical margins due to the devastating impact in March, April, and May," Kaufman Hall reported,  "with the YTD operating margin median without CARES Act funding at around –200% (or 700bps lower) compared to typical operating margins."

Even with CARES Act money, Kaufman Hall said YTD operating margins are about -50% (or 180bps lower) compared with 2019. Excluding CARES relief, Operating EBITDA Margin declined 3% (or 47 bps) year-over-year. Operating Margin remained relatively flat, with just over 1% increase or 0 bps year-over-year change.

June's improving margins came as hospitals contend with greatly reduced but slowly recovering inpatient and emergency department volumes.

Hospitals of all sizes saw decreases both year-over-year and compared to budget for Discharges, Adjusted Discharges, Adjusted Patient Days, and ED Visits, Kaufman Hall said.

Smaller hospitals of 0-25 beds saw the biggest drops in Discharges, falling 16% year-over-year and 19% below budget. For Adjusted Discharges, hospitals with 200-299 beds saw the greatest year-over-year decrease of 11%, while hospitals with 0-25 beds saw the greatest decrease to budget, at 12%, the report found.

"Hospitals with 100-199 beds had the largest year-over-year drop in Adjusted Patient Days at 10%, while hospitals with 200-299 beds saw the greatest decrease to budget, also at 10%, the report said.

Hospitals of all sizes saw year-over-year decreases in ED Visits of 16% or more, with 100-199 bed hospitals seeing the biggest decrease at 22%. Hospitals with 100-199 beds also had the greatest decrease to budget for ED Visits at 22%, Kaufman Hall reported.

“On a year-to-date basis, hospitals are still well below their historical margins due to the devastating impact in March, April, and May.”

John Commins is a content specialist and online news editor for HealthLeaders, a Simplify Compliance brand.


KEY TAKEAWAYS

June's improving margins came as hospitals contend with greatly reduced but slowly recovering inpatient and emergency department volumes.

Much of the improvement could be credited to hundreds of billions of dollars in federal CARES Act emergency aid.

Even with CARES Act money, YTD operating margins are about -50% compared with 2019.

Hospitals of all sizes saw decreases both year-over-year and compared to budget for Discharges, Adjusted Discharges, Adjusted Patient Days, and ED Visits.


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