April 2020
Kaufman Hall Perspective
Kaufman Hall Perspective
Hospitals across the country took a financial beating in March, as the first effects of the COVID-19 pandemic hit the industry, particularly in the second half of the month. Volume and revenue declines, along with flat expenses, resulted in a dramatic fall in margin within a matter of weeks, plunging not-for-profit hospitals, which historically operate on thin margins, deep into the red.

Hospitals’ median Operating EBITDA Margins fell more than 100% in March, dropping a full 13 percentage points relative to last year. This represents a dramatically greater change than seen most months, as illustrated in the chart below. For example, the median Operating EBITDA Margin change was up just 1 percentage point in March 2019, and down 1 percentage point in February 2020. These margins likely fell even further across broader health systems, which often include substantial physician and ambulatory operations outside of the hospital.
Volume and Revenue Declines
Across-the-board volume declines were a major contributor to the steep decline in margins, as providers postponed elective procedures to free capacity and equipment for COVID-19 patients, and as individuals cancelled appointments for fear of contracting or unwittingly spreading the virus. Operating Room minutes were down nearly 20% compared to the same period last year, and were more than 25% below budget.
These cancellations drove significant declines in revenues, as hospitals rely on income from scheduled procedures—such as joint replacements and non-emergent heart surgeries—to balance losses from many other acute care services. March revenues fell 13% compared the same period last year, and were significantly below budget expectations, 13% lower than budget for inpatient revenue and 17% lower than budget for outpatient revenue.
Cancellations also drove significant declines in hospital occupancy rates, as nearly half of the nation’s hospital beds sat empty in anticipation of the coronavirus surge. The median occupancy rate was 53% in March, down from 65% in March 2019. Year-over-year discharges decreased 11%, adjusted discharges fell 13%, and adjusted patient days fell 15%. ED visits dropped 15% year-over-year as people stayed home, or delayed or
avoided care
to lessen risks of exposure.
At the same time, bad debt and charity rose 13% year-over-year—increases that likely will accelerate in coming months as people lose coverage due to the economic slowdown.
Looking Forward
This is just the beginning. For many hospitals, the volume and revenue impacts primarily hit the last two weeks of March—showing just how quickly the pandemic is upending the industry. The results will be even more dramatic in coming months, as hospitals experience the effects of COVID-19 over extended periods.
The nation’s hospitals continued to incur high expenses in March, despite seeing far fewer patients. This stark imbalance illustrates that hospitals were unable to reduce expenses as they maintained front-line caregivers in anticipation of mounting COVID-19 cases, and retained additional staff to cover caregivers who may become infected. Organizations also incurred added expenses to maintain and expand inventories of drugs, supplies, equipment, and capacity in preparation for a surge. Expenses were either flat or up slightly for the month, with total labor expense up 3% year-over-year and total non-labor expense up 1% year-over-year.
James Blake
Data Science and Analytics
Erik Swanson
John Maxwell
Ian Crane
Anika Ghosh
Michael Voss
John Doerpinghaus
Will Newton
Data Operations and Technology
Scott Engel
Jared Murray
Kermit Randa
Axiom Comparative Analytics Product
Kevin M. Smith
Carolyne Krupa
Rob Fromberg
Rob Kunzler
Adam Beeson
Christine Campbell
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Please direct all questions or comments to
Special Contributors
Paul Crnkovich
Dawn Samaris
Margin, Dan Majka
Subject Matter Specialists
Margin, Kris Goetz
Volume, Jeff Kilpatrick
Volume, Brian Pisarsky
Revenue, Jason Sussman
Expense, Gregg Lambert
Expense, Therese A. Fitzpatrick
Expense, Brian Hubbard
Non-Operating, John Andersen
Revenue, John Bauerlein
Non-Operating, Ilan Weissberg
Non-Operating, John Ahn
Non-Operating, Garrett Johnson
Craig Jones
Axiom Sales and Marketing
Amanda Johnson
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