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Hospitals see solid July financial performance thanks to increased volumes

These improvements don't necessarily translate to sufficient margins, however, as hospitals in many markets are still struggling.

Jeff Lagasse, Associate Editor

If U.S. hospitals experienced underwhelming financial performance in June, they largely rebounded in July due to an increase in inpatient and emergency room volumes, according to Kaufman Hall's August 2019 Flash Report.

Operating earnings were up 77.5 basis points in July as compared to the previous month, and operating margin was up 105 ponts. In all, that's good for improved profitability for hospitals in six of the past seven months.

The authors caution, though, that these improvements don't necessarily translate to sufficient margins -- meaning many hospitals are still struggling. And individual hospital margins don't strictly correlate to the overall financial health of their parent health systems.

WHAT'S THE IMPACT

Following declines in June, hospital volumes in July were up across the board. Discharges, ER visits and adjusted volume rose 3 to 4% month over month, and average length of stay declined 1.6%. Operating room minutes increased 8.1 percent. Volumes also rose year over year, with adjusted discharges up 3% and adjusted patient days up 4.5%.

Continuing the trend of previous months, July revenue performance fell short of budget expectations for both net patient services revenue per adjusted discharge and NPSR per adjusted patient day. NPSR per adjusted discharge rose 4.6% year over year, and NPSR per adjusted patient day rose 3% over that time. Bad debt and charity care was more than 5% above budget, and saw month-over-month and year-over-year growth during the month.

Expense indicators were mixed. Performance was favorable compared to June but unfavorable compared to July 2018 -- total expense per adjusted discharge rose 2.9% year over year for a third consecutive month of increases, but decreased 1.7% month over month.

Because of a 0.8% month-over-month decrease in labor expenses per adjusted discharge, contrasted with an increase in adjusted discharges, the authors say organizations may be tightening labor expense management. Supply expenses per adjusted discharge rose 8.3% from the previous year, contributing to a 3.7% year-over-year increase in non-labor expense per adjusted discharge.

THE LARGER TREND

The trend is in keeping with previous Flash reports. In May, for example, Kaufman Hall found positive hospital margin performance that was driven largely by solid expense management, though some individual hospital margins were still insufficient. Volume performance was strong during that month as well.

The latest report found labor markets were robust in July, with non-farm payrolls increasing by 164,000. The unemployment rate hovered near historical lows at 3.7%.

Twitter: @JELagasse

Email the writer: jeff.lagasse@himssmedia.com