October was a profitable month for the nation’s hospitals, in the context of both year-over-year and month-over-month earnings.
According to the latest report from consulting company Kaufman Hall, which included data from more than 800 hospitals, median operating earnings before taxes increased 20 percent since September and 6 percent compared to October 2018. Similarly, operating growth margins increased 35 percent month-over-month and 10.4 percent year-over-year.
Hospitals with 25 or fewer beds saw the greatest growth, with earnings before taxes increasing 15.3 percent year-over-year. Over the same time frame, large hospitals with 500 or more beds saw a decrease of 1.9 percent.
One reason for the discrepancy is that smaller hospitals experience biggers swings in profitability than larger ones.
“An early, bad flu season can move a zero-to-25-bed hospital a lot,” Jim Blake, one of the report’s authors, told Modern Healthcare. “Versus with a big complex hospital, it’s just a portion of their overall business. They have so many different lines of business that movements are smaller for any one thing.”
Another category where small hospitals came out on top: patient days. They were up 12.7 percent year-over-year, compared to less than 4 percent growth for all other categories. Small hospitals suffered, however, when it comes to discharges, which were down 8.4 percent year-over-year whereas large hospitals were up 5.9 percent.
There were some positive findings for all hospital types. For example, Kaufman Hall has seen hospitals become more efficient with labor, and October 2019 was no different. Labor expenses per adjusted discharge were down 1.8 percent year-over-year and 3.1 percent month-over-month across all facilities.
In addition, bad debt was down 4.8 percent in October even though it had been rising over the past 18 months due to growing uninsured rates. The report’s authors stress, though, that this shift doesn’t indicate a trend just yet.
Kaufman Hall analysts predict that over December, operating margins before taxes will fall 8.9 percent (a -129.6 bps change) but increase 3.6 percent or 85.1 bps year-over-year.