Hospitals across the country took a financial hit in March, as the first effects of the COVID-19 pandemic reached the industry, particularly in the second half of the month. Volume and revenue declines, along with flat to rising expenses, resulted in a dramatic fall in margin within a matter of weeks, plunging not-for-profit hospitals, which historically operate on thin margins, deep into the red.

Hospitals’ median Operating EBITDA Margins fell more than 100% in March, dropping a full 13 percentage points relative to last year, bringing the median margin into negative territory. This represents a dramatically greater change than seen in past months, as illustrated in the chart below. For example, the median Operating EBITDA Margin change was up just 1 percentage point in March 2019, and down 1 percentage point in February 2020. Margins likely fell even further in March across broader health systems, which often include substantial physician and ambulatory operations outside of the hospital.

Source: Kaufman Hall, National Hospital Flash Report, April 2020


The Northeast/Mid-Atlantic region took the biggest hit, as those states were among the first to issue stay-at-home orders the second half of March, and the region continues to see the highest concentrations of COVID-19 cases in the country. Northeast/Mid-Atlantic hospitals saw median Operating EBITDA Margin fall 167% compared to March 2019, and 172% compared to budget. The declines were due in part to the region having some of the most significant decreases in surgery volumes for the month, coupled with increases in labor and non-labor expenses.

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Volume and Revenue Declines

Across-the-board volume declines were a major contributor to the steep decline in margins, as providers postponed elective procedures to free capacity and equipment for COVID-19 patients, and as individuals cancelled appointments for fear of contracting or unwittingly spreading the virus. Overall Discharges decreased 11% year-over-year, while Adjusted Patient Days declined 15% year-over-year. ED Visits decreased 15% year-over-year, and Operating Room Minutes were down 19% compared to the same period last year.

Cancellations also drove significant declines in hospital occupancy rates, as nearly half of the nation’s hospital beds sat empty in anticipation of the coronavirus surge. The median occupancy rate was 53% in March, down from 65% in March 2019.

These volume drops drove significant declines in revenues, as hospitals rely on income from scheduled procedures—such as joint replacements and non-emergent heart surgeries—to balance losses from many other acute care services. March revenues fell 13% compared the same period last year, and were significantly below budget expectations, 13% lower than budget for inpatient revenue and 17% lower than budget for outpatient revenue.

At the same time, Bad Debt and Charity as a Percent of Gross rose 13% year-over-year—increases that likely will accelerate in coming months as people lose coverage due to the economic slowdown.



The nation’s hospitals continued to incur high expenses in March, despite seeing far fewer patients. This stark imbalance illustrates that hospitals were unable to reduce expenses as they maintained front-line caregivers in anticipation of mounting COVID-19 cases, and retained additional staff to cover caregivers who may become infected. Organizations also incurred added expenses to build up drugs, supplies, equipment, and capacity in preparation for a surge.

Although total expenses were only slightly higher for the month, Total Expense per Adjusted Discharge jumped 18% compared to March 2019. Supply Expense per Adjusted Discharge increased 15% year-over-year. The smallest hospitals of 0-25 beds were most affected by supply costs, with a 40% year-over-year increase for this metric. Drug Expense per Adjusted Discharge jumped 30% compared to the same period last year across all hospitals.


Read the Full April 2020 Hospital Flash Report

Looking Forward

This is just the beginning. For many hospitals, the volume and revenue impacts primarily hit the last two weeks of March—showing just how quickly the pandemic is upending the industry. The results will be even more dramatic in coming months, as hospitals experience the effects of COVID-19 over extended periods.

See Kaufman Hall’s April National Hospital Flash Report for more detail on how the earliest days of the COVID-19 pandemic have affected hospital financial performance.