Hospitals record low-to-negative margins in February: report

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Hospitals record low-to-negative margins in February: report

by John R. Fischer, Senior Reporter | March 26, 2021
Business Affairs
Declining inpatient volume and continuing low outpatient volume led to low-to-negative margins for U.S. hospitals in February 2021
U.S. hospitals saw low-to-negative margins in February brought on by decreased inpatient volumes and continued low outpatient volumes as a result of the pandemic, according to Kaufman Hall’s latest National Hospital Flash Report.

“In the months ahead, hospitals and health systems will need to adjust their focus from acute to less acute patients, given that continued low outpatient volumes will likely fail to offset decreasing inpatient volumes. The pandemic has significantly changed behaviors — with many patients continuing to delay non-urgent care and rely more heavily on telehealth services,” said said Jim Blake, a managing director at Kaufman Hall and publisher of the National Hospital Flash Report, in a statement.

The median Kaufman Hall hospital operating margin index was -0.5% in February, excluding CARES Act funding. The federal aid brought it up to 0.4%. The median EBITDA margin was 4.1% without it and 5.4% with it, while operating margin dropped 30.8% year-over-year and operating EBITDA margin fell by 22.6%.

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Gross operating revenue fell 4.6% YOY, not including CARES aid, and inpatient revenue dropped 4.4%. Outpatient revenue fell 5.5% compared to the same time last year, falling below prior-year levels for a tenth time in the last 11 months.

Volumes also dropped below February 2020 levels across most metrics, with adjusted discharges down 13.8%, adjusted patient days down 8.3%, and operating room minutes below 6.9%. The largest declines were in ED visits at 26.8% YOY. EDs have seen double-digit declines every month since the start of the pandemic. The average length of stay rose 7.3% compared to February 2020.

High costs associated with managing the virus continued to go up, with adjusted expenses still above prior-year levels. Among them were total expense per adjusted discharge by 19.6%; labor expense per adjusted discharge by 18.8%; non-labor expense per adjusted discharge by 20.7%; supply expense per adjusted discharge by 18%; drug expense per adjusted discharge by 29.1%; and purchased service expense per adjusted discharge by 24.3%.

On a positive note, national COVID-19 metrics declined throughout February, following record highs in early January. In addition, the average length of stay dropped 3.4% from January, reflecting a decrease in high acuity COVID-19 patients requiring longer hospital stays.

“Declines in coronavirus-related hospitalizations are an encouraging sign in our fight against the pandemic,” said Blake.

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