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Report: Hospital Margins Tight Even with Improved Revenues, Volumes

Analysis  |  By Alexandra Wilson Pecci  
   August 02, 2021

Those tight margins are being driven by rising expenses and COVID-19 Delta variant concerns.

Despite improved revenues and increased volumes, margins were still very tight for hospitals and health systems in June, finds Kaufman Hall's new National Hospital Flash Report.

Those tight margins are being driven by rising expenses and COVID-19 Delta variant concerns.

Here are some of the report's key findings about hospital median operating margin index:

  • It was 2.8% in June, not including federal Coronavirus Aid, Relief, and Economic Security (CARES) Act funding
     
  • With CARES Act funding, it was 4.3%
     
  • Compared to the first six months of 2020, operating margin jumped 89.5% year-to-date, not including CARES
     
  • With CARES, operating margin was up 48.7% year-to-date
     
  • Compared to the first half of 2019, operating margin was down 10.3% year-to-date without CARES but rose 3.7% year-to-date with CARES   

About total expense per adjusted discharge, the report found that:  

  • It fell 2.6% from January-June compared to the first six months of 2020, when large-scale purchases of personal protective equipment and other items needed to care for COVID-19 patients drove up hospital expenses
     
  • Compared to the first six months of 2019, however, total expense per adjusted discharge was up 14.5%

As for volumes:

  • They rose above 2020 levels but remained down versus pre-pandemic levels across key metrics such as adjusted discharges, which rose 10.1% year-to-date compared to January-June 2020, but fell 4.4% year-to-date compared to the same period in 2019.
     
  • Emergency department vsits rose 3.2% year-to-date versus 2020 but were down 14.8% year-to-date from 2019.
     
  • Operating room minutes were up across the board, rising 20.4% year-to-date above last year's results, and 2.6% year-to-date versus 2019.   

When it comes to revenues, the report found they were up compared to both 2019 and 2020, due in part to rising outpatient revenues. Specifically:

  • Gross operating revenue (not including CARES) rose 18.2% year-to-date over 2020 and 7.9% year-to-date versus 2019.
     
  • Inpatient revenue was up 11.9% year-to-date compared to the first six months of 2020, and 3.3% year-to-date compared to the same period in 2019.
     
  • Outpatient revenue saw the biggest increases, up 24.3% year-to-date from 2020 and 9.6% year-to-date from 2019.   

Alexandra Wilson Pecci is an editor for HealthLeaders.


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