Hospital profits on the decline

Hospitals are seeing a drop in profitability, according to a flash report from Kaufman Hall.

In August, hospital profitability dropped for the second month in 2019, with EBITDA margins dropping 9.4%, according to the report. Compared to the same time last year, operating margin declined 11.4%.

The declines, which affected all geographic groins and bed sizes, were driven by softening volumes, according to the report, with inpatient discharges, emergency department visits and operating room volumes all dropping more than 1.5% from last year. Hospitals are having a hard time adjusting expenses when volumes drop in order to keep profitability at the same level, with volume and profitability being inextricably linked, the report noted.

Volume performance for August was mixed after higher volumes in July, with discharges dropping 1.5% year over year. Overall length of stay did rise 2.1% from August 2018, but both emergency department visits and operating room minutes dropped 2.8% and 2.6%, respectively, compared to budget.

Also during the month, bad debt and charity care rose 5% from August 2018.

“Hospitals nationwide continue to struggle with rising levels of unpaid care,” the report reads.

Overall during the month, revenue per unit was lower than July, though net patient service revenue (NPSR) per adjusted discharge was up 3.6% year over year.

With these struggles, hospitals also saw a mixed month of expenses, according to the report. Non-labor expenses in particular are driving year-over-year rise sin expenses. Non-labor expenses per adjusted discharge rose 3.5% in August from a year prior. Labor expense rose 2.4% year over year.

The hospital report came as the U.S. economy was seeing new fears about a future recession, with the manufacturing sector contracting below 50% and a yield-curve inversion in U.S. treasuries.