Hospitals Hit Financial Setbacks in August, Kaufman Hall Report Shows
After experiencing some mild financial turnaround, August was another challenging month for hospitals nationwide as margins declined across the board, reflecting continued volatility in the sixth months of the COVID-19 pandemic, according to the Kaufman Hall September National Hospital Flash Report.
The research showed that among those patient care organizations studied, hospital operating margins are down 7.9 percentage points since the start of the year compared to the first eight months of 2019, not including federal funding from the Coronavirus Aid, Relief, and Economic Security (CARES) Act. Factoring in the federal aid, operating margins are down 2.3 percentage points year-to-date.
The National Hospital Flash Report from the Chicago-based consulting firm provides insights into the performance of hospitals nationwide. Published monthly, the report includes data and analyses across the key areas of margins, volumes, revenues, and expenses derived from more than 800 U.S. hospitals.
In August, operating margins fell 18 percent (1.8 percentage points) year-over-year, 12 percent (1.2 percentage points) month-over-month, and 8 percent (0.7 percentage point) below budget without CARES relief. With the federal aid, operating margins were down 3 percent (0.4 percentage point) year-over-year and 28 percent (2.9 percentage points) month-over-month, but 3 percent (0.4 percentage point) above budget for the month.
Importantly, margin results have consistently fallen below 2019 levels since the start of the pandemic, but the August declines follow three months of moderate month-over-month gains after the most devastating losses in March and April, according to the research.
Multiple factors contributed to the August declines, including continued low volumes and revenues, and high per-patient expenses. Hospitals nationwide saw volumes decline across most measures in August, marking the sixth consecutive month of volumes falling below 2019 performance and below budget.
Meanwhile, emergency department (ED) visits continue to be hit particularly hard, declining 16 percent year-to-date compared to the same period in 2019. ED visits saw the greatest year-over-year declines in August, falling 16 percent compared to both prior year performance and to budget. Operating room minutes are down 14 percent year-to-date and fell 6 percent year-over-year in August, but were less than 1 percent below budget expectations.
What’s more, hospitals continued to see revenue declines in August. Not including CARES funding, gross operating revenue is down 7 percent year-to-date compared to the first eight months of 2019. In August, gross operating revenue fell 2 percent year-over-year and 4 percent below budget. Fewer outpatient visits have led to revenue declines, with outpatient revenue down 10 percent year-to-date compared to January-August 2019. Inpatient revenue has fallen 4 percent over the same period.
At the same time, the research revealed, per-patient expenses continue to rise, as hospitals struggle to control costs relative to lower patient volumes. Total expense per adjusted discharge and labor expense per adjusted discharge both are up 17 percent year-to-date over the first eight months of 2019. In August, total expense per adjusted discharge jumped 15 percent year-over-year and 7 percent above budget.
"While the August numbers are concerning, they are not surprising," said Jim Blake, managing director, Kaufman Hall. "The latest results clearly illustrate the long road ahead for hospitals as they weather the ups and downs of a difficult recovery."
