The nation’s hospitals experienced profitability declines in August, marking just the second month to see declines so far in 2019. Operating Earnings Before Interest, Taxes, Depreciation, and Amortization (EBITDA) Margin declined -9.4 percent or 139 basis points (bps), and Operating Margin declined -11.4 percent or 122.5 bps year over year.
The declines were driven primarily by softening volumes. As was the case in June, hospitals continue to struggle to effectively adjust expenses when volumes flatten in order to maintain sufficient profitability.
The nation’s hospitals saw mixed volume performance in August, following July’s strong performance. Discharges were down -1.5 percent year over year and -0.3 percent compared to budget, but relatively flat month over month. Adjusted Discharges were down -1.2 percent year over year, but up 1.8 percent month over month and 1.0 percent above budget expectations.
Average Lengths of Stay rose 2.1 percent year over year and were 0.7 percent above budget. Both Emergency Department Visits and Operating Room Minutes declined, performing -2.8 percent and -2.6 percent compared to budget, respectively.
Dig into Comprehensive Hospital Performance Data from over 600 Hospitals
Revenue per-unit performance for August fell short of budget expectations and July results. However, Net Patient Service Revenue (NPSR) per Adjusted Discharge grew 3.6 percent year over year, while NPSR per Adjusted Patient Day was flat.
Once again, the IP/OP Adjustment Factor exceeded expectations, but was essentially flat compared to the prior month and prior year. Hospitals nationwide continue to struggle with rising levels of unpaid care, as Bad Debt and Charity as a Percent of Gross rose 5.2 percent year over year, performing 1.5 percent above budget in August.
U.S. hospitals experienced another month of mixed expense performance in August. Most indicators were down slightly month over month, but up year over year. Total Expense per Adjusted Discharge rose 4.0 percent year over year for its fourth consecutive month of increases, but decreased slightly month over month.
Much of the year-over-year increases can be attributed to increasing non-labor expenses. Non-Labor Expenses per Adjusted Discharge rose 3.5 percent year over year, while Labor Expense per Adjusted Discharge rose 2.4 percent.
Global recession fears contributed to drastic drops in U.S. Treasuries and further yield-curve inversion in August. The 30-year Treasury yields decreased 56 bps in August, down 105 bps since the beginning of the year. The 30-year MMD also dropped drastically, ending the month at 1.84 percent.
The U.S. manufacturing sector contracted in August for the first time in three years. The Institute for Supply Management (ISM) Manufacturing Index declined to 49.1 percent, with any reading below 50 percent signaling a contraction. However, the U.S. labor market continued to shrug off economic headwinds, with nonfarm payrolls adding 130,000 jobs for the month.