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April was Large Hospitals’ Most Profitable Month Since Mid-2018: Report

Hospitals were more profitable in April than they were compared with the same period a year ago, according to a new Kaufman Hall report. Some hospitals are finally beginning to see the results of their cost-cutting measures, prompting the increase, according to the Chicago-based company, which provides software, data and consulting services to the healthcare, higher-education and financial sectors.   

The success relies on “a combination of both patients staying less due to a hospital’s focus on clinical care and variation, as well as while the patient is at the hospital, how to efficiently use those resources,” Kaufman Hall vice president Erik Swanson told Modern Healthcare.  

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This April, operating margins for hospitals grew more than 20 percent and operating earnings before interest, depreciation, amortization, and taxes grew by 8.6 percent, according to Kaufman Hall’s National Hospital Flash Report. In addition, increases in patient volumes and decreases in lengths of stay resulted in slight increases in patient revenue. The report comes from data gathered from more than 600 for-profit and not-for-profit hospitals.

While year-over-year performance was strong, operating margins were down 2.4 percent in April compared to March, according to the May 2019 Kaufman Hall Perspective-National Hospital Flash Report. Softer inpatient and Emergency Department (ED) volumes contributed to this decrease in profitability, as did increases in non-labor expenses such as drugs and supplies.    

Volumes generally were up year over year on a national basis, but down month over month. Adjusted Discharges rose 5.4 percent year over year in April, and were 3.4 percent above budget, according to the Flash Report. Adjusted Patient Days were up 1.5 percent year over year, and 2 percent above budget.

Meanwhile, Emergency Department visits were 2.6 percent lower than budget expectations and down 3.7 percent month over month, though they increased 1.7 percent year over year. According to the Flash Report, this suggests a potential increase in either outpatient surgery or ambulatory volumes.

Across the board, the average length of stay decreased, although operating room minutes increased significantly. These were up 4.6 percent over March and were slightly over budget, although they remained in line with the prior year.

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For the first time in several months, the nation’s largest hospitals, those with 500 beds or more, saw profitability increases. Especially noteworthy was the strong productivity management, with Full-Time Equivalents per Adjusted Occupied Bed (FTEs per AOB) for this cohort dropping nearly 3 percent year over year. Continuing this performance would help end the trend of profitability challenges at these large institutions.

For the fifth consecutive month, smaller hospitals, 100 to 199 beds, saw profitability gains. But the 300-499-bed cohort saw profitability decline in April, with Operating EBITDA (Earnings before interest, tax, depreciation and amortization) Margin down when compared to April 2018.

Last updated on 10/8/19.

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