August was a challenging month for hospitals nationwide, as margins fell across the board. The declines follow three months of moderate gains after devastating losses in the early months of the COVID-19 pandemic. The latest results clearly illustrate the long road ahead for hospitals as they weather the ups and downs of a difficult recovery.

Operating Margin is down 7.9 percentage points since the start of the year compared to the first eight months of 2019, not including federal funding from the Coronavirus Aid, Relief, and Economic Security (CARES) Act. Factoring in the federal aid, Operating Margin is down 2.3 percentage points year-to-date.

In August, Operating Margin fell 18% (1.8 percentage points) year-over-year, 12% (1.2 percentage points) month-over-month, and 8% (0.7 percentage point) below budget without CARES Relief. With the federal aid, Operating Margin was down 3% (0.4 percentage point) year-over-year and 28% (2.9 percentage points) month-over-month, but 3% (0.4 percentage point) above budget for the month.

Multiple factors contributed to the August declines, including continued low volumes and revenues, and high per-patient expenses. Hospitals nationwide saw volumes decline across most measures in August, marking the sixth consecutive month of volumes falling below 2019 performance and below budget. Discharges are down 11% since the start of the year compared to January-August 2019, and fell 9% year-over- year, 2% month-over-month, and 10% below budget expectations in August.

Adjusted Discharges are down 13% year-to-date, and fell 12% year-over-year, 3% month-over-month, and 8% below budget in August. Adjusted Patient Days are down 10% year-to-date. While they were essentially flat month-over-month, Adjusted Patient Days declined 6% year-over-year and fell 4% below budget for the month.

Emergency Department (ED) Visits continue to be hit particularly hard, declining 16% year-to-date compared to the same period in 2019. ED Visits saw the greatest year-over-year declines in August, falling 16% compared to both prior year performance and to budget. ED Visits also were down 2% month-over-month. Operating Room Minutes are down 14% year-to-date and fell 6% year-over-year and month-over-month in August, but were less than 1% below budget expectations.

Hospitals continued to see revenue declines in August. Not including CARES funding, Gross Operating Revenue is down 7% year-to-date compared to the first eight months of 2019. In August, Gross Operating Revenue fell 2% both year-over-year and month-over-month, and 4% below budget. Fewer outpatient visits have led to revenue declines, with Outpatient Revenue down 10% year-to-date compared to January-August 2019. Inpatient Revenue has fallen 4% over the same period.

Meanwhile, per-patient expenses continue to rise, as hospitals struggle to control costs relative to lower patient volumes. Total Expense per Adjusted Discharge and Labor Expense per Adjusted Discharge both are up 17% year-to-date. In August, Total Expense per Adjusted Discharge jumped 15% year-over-year, 3% month-over-month, and 7% above budget. Labor Expense per Adjusted Discharge increased 14% compared to August 2019, 4% compared to July, and was 6% above budget.

Non-Labor Expense per Adjusted Discharge is up 15% from January-August compared to the same period in 2019, and rose 14% year-over-year, 1% month-over-month, and 6% above budget for the month. Supply Expense per Adjusted Discharge is up 11%, Drug Expense per Adjusted Discharge is up 16%, and Purchased Service Expense per Adjusted Discharge is up 19% year-to-date.

In Non-Operating, the Federal Reserve announced a major policy change in late August that was designed to support job growth, buoying equities growth. The domestic unemployment rate decreased to 8.4% for the month, though the rate of hiring has slowed in key sectors. Meanwhile, the ISM Manufacturing Index rose to 56% in August, indicating growth in production and buffering national GDP from consumer sector struggles.