Blog | Cost Effectiveness of Health

Financial metrics show a steady recovery for hospitals as the COVID-19 pandemic subsides

Blog | Cost Effectiveness of Health

Financial metrics show a steady recovery for hospitals as the COVID-19 pandemic subsides

Margins are on the rise but remain short of 2019 levels, while revenues have surpassed 2019 numbers.

The latest financial data from the hospital sector paints a picture of a continuing recovery from the depths of the COVID-19 pandemic.

Namely, margins have steadily increased compared with 2020. The improvement is driven in part by rising volumes, according to Kaufman Hall’s latest National Hospital Flash Report.

Margins remain narrow by usual standards. Median operating margin was 2.6% in May when disregarding CARES Act funding and 3.5% with the funding. Operating EBITDA margin was 7.2% or 8%, depending on whether CARES funding was considered.

But such figures represent a big jump from a year prior. Through the first five months of 2021, operating margin was up by 95.2% and operating EBITDA margin by 102.4% compared with the same period in 2020, when discounting CARES funding. When including CARES funding, the increases dropped to 56.6% and 40.4%, respectively.

“Increasing patient volumes contributed to the YTD margin increases, especially compared to low volumes seen with national shutdowns and restrictions on nonurgent procedures in the early months of COVID-19,” the report states.

Margins continue to trail pre-pandemic levels. For the first five months of 2021, compared with the same period in 2019, operating margin was down 20.5% or 9%, depending on whether CARES Act funding was considered. Operating EBITDA margin dropped by 16.7% or 10.7%.

Meanwhile, revenues were up even relative to 2019. Gross operating revenue (not including CARES funding) increased by 5.9% relative to the first five months of 2019 and by 18.6% compared with the same period in 2020. A surge in outpatient revenue led the rally, with increases of 6.8% from 2019 and 25.1% from 2020.

Expenses likewise were up compared with 2019 but dropped from 2020 levels.

About the Author

Nick Hut

is a senior editor with HFMA, Westchester, Ill. (nhut@hfma.org).

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