Hospitals See First Signs of Financial Recovery Amid COVID-19 Pandemic, but Overall Performance Remains Well Below 2019 Levels
CHICAGO – June 24, 2020 – Hospitals and health systems across the country began to see signs of financial improvement in May following two brutal months of poor margin, volume, and revenue performance caused by the COVID-19 pandemic, according to a new Kaufman Hall report.
For most hospitals, margins improved significantly from April to May due to federal emergency CARES Act funding and an uptick in volumes compared to low levels seen in April. Even so, margins remained well below 2019 levels and below budgets. These and other findings are highlighted in the June issue of Kaufman Hall’s National Hospital Flash Report, which draws on data from more than 800 hospitals.
The more than $50 billion in CARES Act funding provided temporary relief, helping to push May’s median hospital Operating Margin to 4%. Without this funding, the median margin would have been –8%. Overall, Operating Margin rose 100% from April to May, but fell 13% year-over-year and 6% below budget. These results follow April’s record-low performance, when Operating Margin plunged 282% compared to the same period last year.
“The May results provide a glimmer of hope for our nation’s hospitals, but they also serve as a stark reminder of the long road ahead,” said Jim Blake, managing director, Kaufman Hall. “This pandemic is far from over, and the path to recovery will be arduous. Different organizations will move at different speeds as healthcare leaders continue to navigate the clinical, operational, and financial impacts of an unpredictable virus, and shape their organization’s role in a post-COVID-19 environment.”
Volumes also increased month-over-month in May, but decreased year-over-year and compared to budget across most measures. Adjusted Discharges were up 30% month-over-month, but down 27% year-over-year and 26% below budget. Operating Room Minutes saw the biggest increase of any volume metric, jumping 92% compared to low levels seen in April, as many hospitals resumed non-urgent procedures.
Without the CARES Act funding, May revenue results were poor, but demonstrated some recovery, with actual revenues lower year-over-year but up compared to April. Total Gross Revenue was down 14% compared to May 2019, but up 29% month-over-month. Outpatient Revenue was down 27% year-over-year, but saw the largest month-over-month increase at 39%. Inpatient Revenue fell 12% year-over-year and rose 19% month-over-month.
Hospitals also reduced actual expenses in May compared to the same period last year by controlling variable costs, with many instituting furloughs and other aggressive cost control actions. Total Expense decreased 6% year-over-year, but was up about 1% month-over-month. Total Labor Expense fell 3% year-over-year and rose 2% month-over-month, while Total Non-Labor Expense fell 7% year-over-year and rose less than 1% month-over-month.
For more details, please see the National Hospital Flash Report.
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Amendola Communications (for Kaufman Hall)