The COVID-19 pandemic continued to drive significant volatility in operating performance for hospitals across the country in July, suppressing volumes and revenues compared to the same period last year. Hospital Operating Margins are down a full 96% or 842 basis points (bps) since the start of 2020 compared to the same seven-month period in 2019, not including Coronavirus Aid, Relief, and Economic Security (CARES) Act funding. Even with the federal relief, Operating Margins still are down 28% or 90 bps year-to-date compared to January-July 2019.

In July, Operating Margins declined 2% (36 bps) year over- year but increased 24% (217 bps) month-over month and were 15% above budget without CARES funding. Operating Earnings Before Interest, Taxes, Depreciation, and Amortization (EBITDA) Margins fell 5% (62 bps) year-over-year but rose 12% (191 bps) month-over-month and were 9% above budget without the aid. 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.

The year-over-year declines came as hospitals saw flat year-over-year gross revenue performance, continued high per-patient expenses, and a fifth consecutive month of volumes falling below 2019 performance and below budget across most metrics. July volumes continued to fall year-over-year, but showed some signs of potential recovery month-over-month. Discharges and Adjusted Discharges both were down 7% compared to July 2019, but up 6% compared to June 2020. Adjusted Patient Days were down 4% year-over-year, but up 7% month-over-month. Since the start of the year, both Discharges and Adjusted Patient Days are down 11% compared to the same seven-month period in 2019, while Adjusted Discharges are down 13%. Emergency Department (ED) volumes have been hardest hit, falling 17% year-to-date compared to the same period in 2019, down 17% year-over-year, and 13% below budget in July. This marks the fifth straight month of double-digit year-over-year declines in ED Visits for hospitals nationwide.

Surgery volumes saw some gains with the continued resumption of non-urgent procedures pushing Operating Room Minutes up 3% month-over-month and 4% above budget, but they remain down 15% year-to-date. Operating Room Minutes were down 1% year-over-year in July. This is in contrast with last month’s report, when they demonstrated year-over-year growth as hospitals continued to catch up on procedures that were delayed due to shutdowns in March and April.

Not including CARES relief, Gross Operating Revenues were essentially flat year-over-year and 2% below budget in July, but have fallen 8% year-to-date compared to the same period in 2019. Inpatient Revenue is down 5% year-to-date and fell 3% below budget in July, but increased 1% year-over-year. Outpatient Revenue is down 11% year-to-date, 1% year-over-year, and 2% below budget. Hospitals nationwide saw actual expenses increase slightly year-to-date and year-over-year in July. Looking first at year-to-date results, Total Expense and Total Non-Labor Expense are up about 1% and Total Labor Expense is up 2% compared to the same seven-month period in 2019. Year-over-year, Total Expenses and Total Labor Expenses both rose 1%, and Total Non-Labor Expense rose 2%.

While the year-to-date increases in actual expenses are minimal, they show that expenses are increasing even as hospitals are seeing fewer patients. Once adjusted for volumes, the higher expenses are more evident as hospitals struggle to hold down per-patient costs.

Total Expense per Adjusted Discharge has jumped 16% year-to-date compared to the same seven-month period in 2019, and rose 9% year-over-year and 5% above budget. Labor Expense per Adjusted Discharge is up 18% year-to-date, and rose 9% year-over-year and 5% above budget in July. Non-Labor Expense per Adjusted Discharge has increased 15% during the first seven months of 2020 compared to the same period of 2019, and jumped 11% year-over-year and was 5% above budget for the month.

Looking at non-operating measures beyond hospital performance, the GDP contracted sharply in July, reflecting a 32.9% decline in the second quarter of 2020. Employment numbers improved as the economy continued to reopen, despite ongoing spread of the virus with U.S. cases surpassing 5 million. The domestic unemployment rate fell to 10.2% as the economy added 1.8 million jobs following record performance in June. However, doubts remain about the health of domestic employment as about 1.4 million individuals filed for unemployment the last week of July. The ISM Manufacturing Index reading of 54.2 in July indicated expansion of the manufacturing sector, and reflected the strongest reading since March of 2019.