U.S. hospital finances experienced a comparatively strong 2019, according to Kaufman Hall’s 2019 Year In Review Flash Hospital Report, which labeled the performance as “cautiously optimistic.”
While revenue and margins increased for the hospitals surveyed, inpatient volumes were weaker and more uneven.
The report from the management consultancy and data provider did unearth some potential warning signs for 2020, including a trend in rising expenses. The report also warned of a slowing economy and the potential economic impact from the coronavirus.
Hospitals are complex, high-volume and low-margin enterprises that often experience operational volatility. The latest report by Kaufman Hall confirmed the uneasy environment in which they operate.
Operating earnings were up 2% in 2019 compared to the prior year, and overall operating margin was up 7.4%. That was driven primarily by small bumps in revenue and patient volume. Net patient revenue per adjusted discharge rose 3.7%, and was up 1.5% per adjusted patient day.
Yet both pre-tax and overall operating margin were down 1.7% and 0.3%, respectively, when hospital budget forecasts were factored in. However, that drop was all attributable to hospitals in the Northeastern U.S.
Nevertheless, overall margins fell into the red in August and November, although they rebounded strongly in December, up 20% in that month compared to December 2018.
However, cost pressures were significant. Total expenses per adjusted discharge were up 3.4%, while labor expenses rose 2.6%. Non-labor expenses per adjusted discharge was up 4%. Adjusted discharges themselves were up only 0.7%, and showed year-over-year declines not only for the first quarter of 2019 but in June, August and November. And overall discharges declined among hospitals compared to budget forecasts in the Midwest and Northeast, down nearly 6% and 4%, respectively. Adjusted patient days were up 2.5%, although the average length of stay rose 1.9%.
While operating room minutes were up 2.2%, they were 0.3% below budget forecasts. Emergency department visits were down 0.4% compared to 2018, and were a full percentage point below forecasts.
“While it was good to see improvements in many financial areas, the long-term trendlines indicate that this is not a time for the C-suite to relax,” said Kaufman Hall Managing Director Jim Blake.
“These modest gains were made during a time when the economy was strong, unemployment was historically low, and government regulations favored business. There also were no existential health threats, such as the COVID-19 coronavirus outbreak nor the risks that come any time there is a national election," Blake continued.