By the end of 2008, U.S. hospitals found themselves facing unprecedented financial challenges. Stock and bond values fell in nearly every asset class, and the credit market crisis forced some hospitals to draw on cash reserves to satisfy financial covenants. Now hospital financial data through the second quarter (Q2) of 2009 indicate that hospitals are beginning a financial recovery through improved margins.
Hospital total margins plunged to historic lows in 2008 but recovered to levels seen before the recession for all hospital classes by Q2 2009. Now about 20 percent of hospitals are operating with negative total margins. Large community hospitals, which had been severely affected by the economic crisis, experienced dramatic improvements. Only 8 percent of hospitals in this group now operate with negative total margin.
Total margins consist of excess revenue derived from operations as well as nonoperating margins, derived primarily from investments. Operating margins have followed stationary cyclical patterns in the recent past. In Q2 2009, median operating margins were greater than 4 percent for all hospital classes. Major teaching hospitals enjoyed the largest median operating margin at about
6 percent. Most hospital classes enjoyed higher operating margins in Q2 2009 than in Q2 2008.
The hospital operational and financial performance data used in this study are quarterly financial data (Q2 2005 through Q2 2009) for general acute care community hospitals. The quarterly samples have, on average, 540 reporting hospitals, comprising 87 small community hospitals (26-99 beds), 156 medium community hospitals (100-249 beds), 97 large community hospitals (250+ beds), 112 teaching hospitals, and 88 major teaching hospitals. Trend data have been weighted to represent the U.S. general acute care population by hospital class and geographic region (census region). Data were developed by Thomson Reuters. For more information, e-mail David Koepke, PhD, at firstname.lastname@example.org.
Publication Date: Monday, February 01, 2010