Hospital financial performance improved in April, but margins are still thin as hospital revenue recovers from COVID-19, a report from Kaufman Hall shows.
Hospital revenue, volumes, and margins increased in April 2021 both year-to-date and year-over-year, but have a long way to go in terms of COVID-19 recovery, according to a report by health care consulting firm Kaufman Hall. Despite the increases, hospital financial performance is down compared to last month.
Kaufman Hall analyzed data from over 900 hospitals, with representation from both large hospitals and small critical access hospitals across the country.
Hospital operating margin rose 8.6 percentage points in April 2021 compared to January through April 2020. When factoring in the Coronavirus Aid, Relief, and Economic Security (CARES) Act funding, operating margin was up 6.9 percentage points. In comparison to April 2020, operating margin increased by 39.3 percentage points without CARES funding and 21.4 percentage points with CARES funding factored in.
“We have to keep the April results in appropriate context,” explained Erik Swanson, senior vice president of Data and Analytics at Kaufman Hall, in a recent press release.
“March and April 2020 were absolutely unprecedented months for our nation’s hospitals and health systems, as they focused their attention on treating patients impacted by the first wave of the pandemic. While we anticipate the data in the months ahead will show additional gains over low levels seen in early 2020, overall margins remain low and fluctuations month-over-month convey continued uncertainties for hospitals, as they work to recover from a profoundly challenging pandemic.”
Hospital volumes decreased compared to March but increased for most metrics year-to-date and year-over-year. Visits to the emergency department fell seven percent but rose 57.2 percent year-over-year and 5.3 percent month-over month. Adjusted discharges and adjusted patient days both rose significantly year-to-date and year-over-year, but both dropped one percent month-over-month.
Meanwhile, operating room minutes increased 189.2 percent year-over-year. Researchers attribute this jump to an uptick in outpatient procedures since the services severely decreased at the onset of COVID-19 in April 2020.
Hospital revenues followed, with gross operating revenue up year-to-date and year-over-year, but were down 2.5 percent from March. Both inpatient and outpatient revenue increased but fell slightly compared to last month.
Hospitals are still feeling the financial strain of the pandemic, even with CARES Act funds. Overall, expenses continue to rise compared to 2020. Total expenses were up 6.6 percent year-to-date and 13.1 percent year-over-year. Despite this, spending in April was down by about three percent compared to March.
“U.S. hospitals and health systems likely will see continued margin, volume, and revenue gains in the coming months compared to dramatic losses seen in the early months of COVID-19. Fluctuations [month-over-month], however, illustrate the continued uncertainties perpetuated by the pandemic,” the report stated.
“Numerous factors will influence the pace of recovery, including the trajectory of vaccination efforts and the continued spread of COVID-19 variants. Healthcare leaders must remain vigilant in efforts to monitor and improve performance as they move forward through this second year of an ongoing pandemic—the end of which remains yet to be determined.”
Researchers noted that margins are still quite thin and that despite the increases in revenue, volume, and margin, hospitals are not in the clear yet.
Lawmakers recently urged HHS to reconsider the June 30th deadline for spending unused funds from the Provider Relief Fund, under the CARES Act. In addition, safety-net hospitals around the country are facing profitability issues and potential closures, despite the HHS allocating $10 billion from the Provider Relief Fund to safety-net hospitals.
The report indicates that hospital financial performance improvements after COVID-19 will be a challenge for the foreseeable future.
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