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Hospital Operating Margins Fell 18% in August

By Jack O'Brien  
   September 25, 2020

Kaufman Hall's latest Flash Report found that the operating margin for provider organizations is down 7.9 percentage points since the start of 2020.

In August, operating margins for hospitals and health systems fell 18% year-over-year, according to Kaufman Hall's latest Flash Report released Friday morning.

The study is the latest monthly analysis of the financial impact of the COVID-19 pandemic on provider organizations.

The Coronavirus Aid, Relief, and Economic Security (CARES) Act funding cannot be understated, as operating margins fell only 3% year-over-year and were 3% above budget when included in Kaufman Hall's analysis.

Related: Health Systems' Road Map to Financial Opportunity

Similarly, the report also found that the operating margin for provider organizations is down 7.9 percentage points since the start of 2020, however, that number shrinks to 2.3 percentage points when CARES Act funding is factored in.

"While the August numbers are concerning, they are not surprising," Jim Blake, managing director at Kaufman Hall, said in a statement. "The latest results clearly illustrate the long road ahead for hospitals as they weather the ups and downs of a difficult recovery."

Broken down by segment, hospitals struggled to build on "three months of moderate month-over-month gains," according to the report.

Hospital volumes declined for the sixth consecutive month, adjusted discharges fell 12% year-over-year, and adjusted patient days fell 6% year-over-year.

Similarly, operating days fell 14% compared to August 2019, while emergency department visits fell 16%, the worst year-over-year decline for a single month in 2020.

Related: 3 Ways to Increase Revenue and Reduce Bad Debt During COVID-19

These issues are further compounded by high expenses and revenues declines.

Hospital outpatient revenues are down 10% year-to-date, inpatient revenues slid 4%, but total expense per adjusted discharge and labor expense per adjusted discharge are up 17% over the same period.

Kaufman Hall's report was released days after a Strata Decision Technology study found that inpatient volumes are approaching 2019 levels, but the lost volumes have not fully recovered from the effects of the pandemic.

Strata's data indicated that inpatient procedures and surgeries did not surge "as expected" and are down nearly 19% compared to 2019 levels, causing a "negative financial impact" on provider organizations.

Related: COVID Impact: Lost Patient Volumes 'Have Not Recovered'

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

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