- Hospitals nationwide posted weak operating performance in November, with operating margins declining both year over year and month over month, according to the National Hospital Flash Report from Kaufman Hall.
- Volumes fell in November across most measures including adjusted discharges, emergency department visits and operating room minutes.
- Meanwhile, labor and non-labor expenses rose more than expected, according to the report, which is based on data from 800 hospitals during November.
Kaufman Hall attributed the lagging performance at the nation's hospitals to declines in both volumes and revenues coupled with higher-than-expected increases in labor and non-labor expenses.
The median operating margin before interest, taxes, depreciation and amortization fell 14.3% month over month in November and 14.5% year over year. The median operating margin dropped 23.4% month over month and 21.3% year over year.
Margins were down across all sizes of hospitals. The largest hospitals — those with 500 or more beds — posted the fifth straight month of declines in profitability. The median EBITDA margin for this group declined nearly 15% year over year.
Meanwhile, the smallest hospitals — those with 25 beds or fewer — posted the worst performance, with a 22.8% decline in year over year EBITDA margin.
Driven by low unemployment rates, labor costs are a major reason for hospitals' struggles to maintain margins over time in 2018 and 2019. "While hospitals are working to optimize staffing efficiencies, rising salaries and wage inflation are counteracting those efforts and driving overall increases in labor expenses," Kaufman Hall's analysts noted.
November was no exception. Labor costs per adjusted discharge rose faster than expected, with a 7.3% increase month over month and 4.9% year over year.
Non-labor expenses per adjusted discharge also were up, increasing 5.1% month over month in November and 2.8% year over year. Overall, non-labor expenses also have risen over time, adding to the strain on hospitals' profitability.
Revenues were weak, too, according to Kaufman Hall. Net patient service revenue per patient day was flat month over month and up 0.4% year over year. Net patient service revenue per adjusted discharge was up 1.4% month over month and 0.3% year over year.
Despite hospitals' lackluster performance in November, executives predict a strong start to 2020 this month, according to Kaufman Hall. They expect the operating EBITDA margins in January to be up 24.2% month over month and 7.4% year over year. Operating margins should be up 40.7% month over month and 13.5% year over year, according to the predictions.