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Analysis

Hospital Operating Margins Down 96% Since Start of 2020

By Jack O'Brien  
   August 24, 2020

Kaufman Hall found that even with federal COVID-19 relief packages, hospital operating margins are still down 28% year-to-date compared to 2019.

Hospital operating margins are down 96% since the start of 2020, according to Kaufman Hall's August Flash Report released Monday morning.

Last month, provider organization operating margins declined 2% year-over-year but rose 24% month-over-month. Similarly, operating EBITDA margins fell 5% year-over-year but rose 12% month-over-month.

The report found that even including funding from the Coronavirus Aid, Relief, and Economic Security (CARES), hospital operating margins are still down 28% year-to-date compared to 2019.

"COVID-19 has created a highly volatile operating environment for our nation’s hospitals and health system," Jim Blake, managing director at Kaufman Hall, said in a statement.

Related: Hospital Margins Improve in June, Volumes Off

Without CARES Act funding, July gross operating revenues were flat year-over-year while the year-to-date metrics were down 8% compared to 2019.

By segment, inpatient revenues are down 5% year-to-date and outpatient revenues are down 11% year-to-date.

Related: Hospitals See 'First Signs' of Financial Recovery

Hospitals and health systems continue to face volume challenges but have seen some improvement compared to spring months when the coronavirus disease 2019 (COVID-19) pandemic began.

In July, discharges were down 7% year-over-year but up 6% month-over-month, while adjusted patient days were down 4% compared to July 2019 but up 7% compared to June 2020.

Related: During Q2, COVID-19 Generated a 'Much Less Dramatic Decline' in Provider M&A Activity

Operating room minutes rose 3% month-over-month as more non-urgent procedures have resumed but remain down 15% year-to-date.

July also marked the fifth straight month of double-digit year-over-year declines for emergency department visits for hospitals.

Related: OSF HealthCare CFO: Future Revenues May Be Less Than Pre-COVID Levels

“COVID-19 has created a highly volatile operating environment for our nation’s hospitals and health system.”

Jack O'Brien is the finance editor at HealthLeaders, a Simplify Compliance brand.


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