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Analysis

Hospitals See 'First Signs' of Financial Recovery

By Jack O'Brien  
   June 24, 2020

One month after margins fell 174%, hospitals have begun to experience the first glimpses of positive financial metrics.

Hospital volumes increased month-over-month in May, pointing to the "first signs" of a financial recovery for provider organizations since the coronavirus disease 2019 (COVID-19) pandemic began, according to a Kaufman Hall report released Wednesday.

Adjusted discharges rose 30% in May compared to April, according to the report, with operating room minutes increasing 92% over the same period. Still, Kaufman Hall noted that adjusted discharges fell 27% year-over-year and were 26% below budget in May.

On the revenue generation side, which had slowed due to the widespread cancellation of elective surgeries at the start of the pandemic, total gross revenues were up 29% month-over-month and down 14% year-over-year. 

Related: Hospital Margins Plummeted 174% in April

Both outpatient revenues and inpatient revenues rose month-over-month, 39% and 19%, respectively, while those same metrics fell year-over-year by 27% and 12%, respectively.

Health systems benefited from the passage of the $2.2 trillion Coronavirus Aid, Relief, and Economic Security (CARES) Act, particularly related to its impact on several crucial metrics, the Kaufman Hall report found.

Related: A Quarter of Rural Hospitals at 'High Risk' of Closure, COVID-19 Likely to Make it Worse

During May, the median hospital operating margin was 4%, though without CARES Act funding, the median margin would have been negative 8%; similarly, operating margins increased 100% month-over-month but were down 13% year-over-year.

"The May results provide a glimmer of hope for our nation's hospitals, but they also serve as a stark reminder of the long road ahead," Jim Blake, managing director at Kaufman Hall, said in a statement

Related: Hospital EBITDA Margins Fell 13 Percentage Points Year-Over-Year in March

Regarding cost containment, hospitals still have challenges to face related to expenses on the labor and non-labor front.

For May, total expenses were up slightly month-over-month but fell 6% year-over-year. Meanwhile, total labor expenses decreased 3% year-over-year and rose 2% month-over-month as total non-labor expenses dropped 7% year-over-year and inched up slightly month-over-month.

Related: AHA Says COVID-19-related Losses for Hospitals Will Surpass $200B by June 30  

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


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