Hospital operating margins nearly eliminated through July, Kaufman Hall says

Dive Brief:

  • Hospital operating margins are severely depressed, down 96% since the start of the year through July compared with the first seven months of last year, not including the financial aid from the federal government, according to the latest report from Kaufman Hall.
  • When factoring in federal relief funds, operating margins were down 28% for the January to July period compared with the same period last year.
  • However, there appear to be signs of recovery. When zeroing in on operating metrics month-over-month from June to July, operating margins did improve 24%, which the consultant group said is likely due to a backlog in patient demand.

Dive Insight:

Despite the fact that the nation is still struggling to contain the novel coronavirus and continues to lead the world in number of confirmed infections, there are good signals for the hospital industry in the latest monthly report from Kaufman Hall.

The coronavirus crisis has battered hospitals as many were forced to stop operations earlier this year to brace for the pandemic. In response, the federal government has unleashed about $175 billion in aid as a shot in the arm for the industry that has tried to weather a direct hit from the virus, although there have been criticisms addressing how that money was dispersed.

“COVID-19 has created a highly volatile operating environment for our nation’s hospitals and health systems,” Jim Blake, managing director of Kaufman Hall, said in a statement.

In July, operating margins were down 2% year over year, but when looking month-to-month in 2020, those margins are improving. “Whether the month-over-month gains will continue remains unknown given the many uncertainties relative to the COVID-19 pandemic, the future course of the virus, and its broader impacts,” according to the report.

Still, July did mark the fifth consecutive month of patient volumes coming in below 2019 levels. As such, revenues are down when excluding federal relief funds.

“Emergency Department volumes have been hardest hit, with double-digit year-over-year declines each month since March,” the report states.

The pandemic is likely to result in unfavorable comparisons to prior-year figures, but volumes month-over-month are showing improvements as well. When comparing performance from June to July, patient discharges are up about 6.2%, emergency room visits have increased nearly 10% and operating room minutes are up 3.2%.