Steep volume and revenue declines along with high expenses drove record-poor margins for U.S. hospitals in April with operating margin index plummeting to negative 29% — as measured by the Kaufman Hall Hospital Operating Margin Index1 based on data from Axiom Comparative Analytics™ — even after receiving more than $50 billion in funding through the CARES Act. 

 

April 2020 National Hospital Flash Report Infographic

 

Revenue

Outpatient revenues took the biggest hit as patients avoided seeking care for fear of contracting the virus and non-emergent services remained closed.

  • Operating margins fell to negative 29% or down 282% year-over-year (YOY) and 120% compared to March 2020
  • Operating Earnings Before Interest, Taxes, Depreciation, and Amortization (EBITDA) margin fell to negative 19% or down 174% YOY 
  • Outpatient Revenues fell 50% YOY
  • Inpatient Revenues declined 25% YOY

 

Volume and Expense

Volumes declined significantly and efforts to reduce costs through furloughs and other measures did not keep pace with those losses.

  • Operating Room minutes fell 61% and emergency visits declined 43% YOY
  • Inpatient hospital discharges fell by 30% YOY, with outpatient activity decreasing even further
  • Expenses decreased across the board slightly but did not keep pace with revenue and volume declines:
    • Total expense decreased by 7.4% YOY 
    • Labor expense decreased by 4.8% YOY 
    • Non-labor expense decreased by 9.3% YOY

 

What's Next

The COVID-19 pandemic will forever change healthcare, though no one is yet sure exactly how. Here’s what we do know:

  • Hospitals cannot sustain this level of losses.
  • Clinical quality must remain a top focus but financial performance is a higher imperative than ever.
  • The post COVID-19 business model will be different with reconfigured and new businesses, service lines, and revenue sources as a result of new market expectations; new competition is also likely.
  • Real-time data and analysis will help healthcare leaders design effective recovery strategies and seize opportunities to optimize performance and serve their communities in a post COVID-19 world. 
  • Hospitals with effective performance data, budgeting, modeling, and comparison tools will have an advantage over their competition.

Download the full National Hospital Flash Report for more detailed data, including revenue, volume, and expense figures by region and bed size.

 

Source: Kaufman Hall’s May 2020 National Hospital Flash Report, which uses actual budget data sampled from over 800 hospitals from Axiom Comparative Analytics™ — software that provides unparalleled comparisons to drive real-time operational decisions and performance improvement initiatives. Learn more about how Comparative Analytics can help you find your fastest path to recovery. 

Kaufman Hall Operating Margin Index is a statistically significant hospital operating margin median adjusted for allocations from corporate, physician, and other entities to the hospitals created from actual data sampled from over 800 hospitals from Axiom Comparative Analytics™.

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