- Hospital profit margins continued to improve during the month of May thanks to "solid expense management" and increased patient volumes, according to a new Kaufman Hall analysis.
- However, hospitals with between 300 and 499 beds recorded margin declines year over year despite patient volume increases. The decline occurred as non-labor expenses increased.
- Hospital patient volumes increased year-over-year on average. The Midwest was the only region to record a drop in discharges at 5%.
The report shows that large hospital facilities continue to operate in a fee-for-service environment and still rely heavily on patient volumes to maintain margins, which the authors characterized as a risky strategy in the June report.
"To manage costs amidst declining or stagnant volumes, the nation's largest healthcare providers need to be willing to invest in the resources needed to build a true culture of change," the authors said.
Nationally, operating margins improved nearly 8% year over year, according to the analysis of data from more than 600 hospitals across the country.
Later this month, for-profit hospital operators will begin reporting their second quarter earnings, coming off of mixed first quarters.
HCA earlier this year boasted its 20th straight quarter of admissions growth and also had a nearly 10% year-over-year revenue increase. UHS saw income and revenue gains but failed to meet analyst expectations, while CHS and Tenet reported losses that still managed to beat Street estimates.
Hospitals with 500 or more beds continued to see margin improvement while facilities with 100 to 199 beds tallied the sixth consecutive month of improved margins, in large part due to controlling expenses during a period of static revenue.
The Midwest outperformed other regions of the country, leading year-over-year margin growth with a 12% increase in operating margin thanks to revenue growth that was about four times greater than the rate of expenses.
"While these trends are generally good news for the industry, margin improvements do not necessarily mean that hospitals are achieving sufficient margins," Kaufman Hall said.