The hospital industry has picked itself up from last year’s “record-poor performance" but now sees mixed metrics in the early part of 2021 as COVID-19 variants spread and lockdown restrictions lift, according to a quarterly report from Kaufman Hall.
Released Monday, the data from more than 900 hospitals suggest year-to-date median operating margins rose 2.5 percentage points without CARES funding and 3.2 percentage points with the relief when compared to the first three months of 2020.
Operating earnings before interest, taxes, depreciation and amortization (EBITDA) for the same period gained by 2.2 percentage points without CARES funding and 3 percentage points with it.
The difference was much more stark when measuring margins year over year.
Without CARES relief, March 2021’s operating margin leaped 14.5 percentage points compared to March 2020, and 14.8 percentage points with the federal support. Year-over-year EBITDA picked up 13.3 percentage points without CARES funding support and 13.5 percentage points with it.
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“Those gains, however, are largely due to measuring March 2021 performance against the same period last year, when hospitals were hit with devastating losses from national shutdowns and halting of outpatient procedures during the first month of the pandemic,” Kaufman Hall wrote in the report.
Most volume metrics saw a quarterly decline compared to last year, with some again flipping to an increase when looking at March alone.
Discharges, for instance, dropped 8.2% year to date but increased 1.8% year over year. Emergency department visits declined 19.2% year to date and 3% year over year.
Operating room minutes were the exception, increasing both 3.1% year to date and 43.9% year over year.
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“While surgery volumes remain down compared to pre-pandemic levels, the increases suggest that concerns over possible exposure to COVID-19 are easing as fewer people opt to delay non-urgent procedures,” Kaufman Hall wrote.
Gross operating revenue increased 4.4% when measuring the first quarter, and 24.8% for March year over year. The gain was nearly evenly split across inpatient and outpatient revenues when measuring year to date (3.7% versus 3.8%) but was heavily weighted in favor of outpatient revenue increases when examining March alone (13% versus 31.6%).
Total expense, total labor expense and total non-labor expense were in lockstep during the quarter, with each increasing 4% year to date (15% per adjusted discharge). Year-over-year total expenses rose 7% but declined 4.2% per adjusted discharge.
Looking forward, Kaufman Hall was optimistic about the impact recovering patient volumes would bring to hospitals’ businesses but warned that pandemic damages are far from over.
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“We expect to see additional margin gains in the months ahead, especially in comparison to record-poor performance in the early months of the pandemic,” Jim Blake, a managing director at Kaufman Hall and publisher of the National Hospital Flash Report, said in a statement. “Over the course of 2021, however, we project hospital margins could be down as much as 80% and revenues down as much as $122 billion compared to pre-pandemic levels as hospitals continue to feel the dire repercussions of COVID-19.”
The group also predicted that anywhere from one-third to one-half of U.S. hospitals could have negative operating margins by the end of 2021.
An analysis published by Kaufman Hall last month outlined two potential scenarios for hospitals based on the rollout of COVID-19 vaccines and COVID-19 case counts.
The more optimistic of these saw recovery begin in the first quarter and hospitals’ margins land at 10% below pre-pandemic levels. The pessimistic scenario envisioned slower recovery beginning in the second quarter that results in the 80% negative margins referenced in the recent quarterly report.