Practice Management News

Hospital Financial Performance Shows Signs of Post-COVID Recovery

Hospital financial performance is improving, with hospital volumes, revenues, and margins increasing in May after months of dramatic losses.

Hospital financial performance on the road to recovery

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By Jacqueline LaPointe

- Hospitals are taking steps on the road to recovery after dramatic losses across volumes, revenues, and other financial metrics during the COVID-19 pandemic, according to the latest hospital financial performance data from Kaufman Hall.

The firm’s latest Hospital Flash Report found increases across hospital volumes, revenues, and margins last month compared to significant losses observed at the start of the COVID-19 pandemic early last year. However, the more than 900 hospitals analyzed for the report are most certainly not out of the woods yet.

For example, adjusted discharges were up by 9.1 percent year-to-date (YTD) in May compared to performance form January to May 2020. However, the metric was still down by 7.1 percent YTD compared to the same period in 2019.

Adjusted patient days also made a significant recovery, increasing 14.3 percent YTD. The metric was also only 0.4 percent off compared to the YTD in 2019, placing it close to pre-pandemic levels. Operating room minutes also came close to pre-pandemic levels, increasing by 28.3 percent YTD from 2020 and 0.8 percent YTD compared to 2019.

Meanwhile, emergency department (ED) visits remained flat compared to last year when people stopped using emergency services as much during the height of the pandemic. Hospital ED visits are still well below pre-pandemic levels, down by 16.1 percent compared to that period.

Increasing patient volumes—particularly on the outpatient side—boosted hospital margins. However, hospitals continued to operate on narrow margins, the report stated.

The median Kaufman Hall hospital operating margin index was just 2.6 percent in May, not including federal funding for COVID-19 recovery. With the fund, the index was 3.5 percent.

Additionally, the median operating EBITDA (Earnings Before Interest, Taxes, Depreciation, and Amortization) margin in May was 7.2 percent without federal funding and 8.0 percent with the funding.

Hospital margins in May were a marked difference compared to the last year. Operating margin increased by 95.2 percent YTD and operating EBITDA margin increased by 102.4 percent, not including pandemic-related federal funding.

However, compared to pre-pandemic levels during the first five months of 2019, operating margin was down by 20.5 percent YTD without federal funding and down by 9.0 percent with the funding. Operating EBITDA was down by 16.7 percent YTD without the funding and by 10.7 percent with the funding.

Hospital revenues also improved by May, with gross operating margin without COVID-19 federal aid increasing by 18.6 percent YTD from 2020 and 5.9 percent compared to 2019 levels.

Outpatient revenue saw the greatest improvement by May, increasing by 25.1 percent YTD above last year’s levels and by 6.8 percent compared to the same period in 2019. Meanwhile, inpatient revenue also increased by 13.1 percent YTD compared to last year and 2.9 percent compared to the same period in 2019.

The report also showed some relief when it came to rising hospital expenses. Hospitals have struggled with expenses since the start of the COVID-19 pandemic when there were substantial shortages of personal protective equipment (PPE) and other supplies needed to care for infected patients.

Compared to early 2020 though, total expense per adjusted discharge was down by 1.7 percent YTD. However, the metric was still up compared to the January to May period in 2019. Compared to pre-pandemic levels, total expense per adjusted discharge was by 16.6 percent YTD.

Overall, hospital financial performance is improving alongside general economic recovery. Authors of the report pointed out that initial jobless claims decreased to below 400,000 in May for the first time since March 2020.

The seven-day moving average of new COVID-19 cases also fell by 63 percent last month, from nearly 49,500 on the first of May to a little over 18,000 by the end of the month, cited data from the Centers for Disease Control and Prevention (CDC) confirm.

“The data reflect an encouraging trajectory for our nation’s hospitals and health systems, as they continue to recover from the devastation of COVID-19,” Erik Swanson, a senior vice president of Data and Analytics with Kaufman Hall, said in a press release emailed to RevCycleIntelligence. “We expect to see gains over the lows seen in early 2020, but comparisons to 2019 provide greater insights to how hospitals are faring relative to pre-pandemic performance.”