February 2019
Profitability
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EBITDA Margin by Region ?
All regions of the country experienced increased profitability in January, with the exception of the West. However, the Western region performed differently compared to other areas of the country on several measures (described later in the report). Caution should be taken in analyzing these results, as they could be attributed to one-time events related to natural disasters.
After Operating EBITDA declines of 50 bps in December, both the Northeast and Great Plains regions performed favorably in January, with Operating EBITDA improving by more than 100 bps in each region.
% Change
Absolute Change
% Change
Absolute Change
National Profitability Observations
Profitability made a surprising jump in January 2019, with Operating EBITDA Margin increasing 68 basis points (bps) from the previous month and 50 bps from January 2018. Operating Margins rose even more favorably, increasing 80.5 bps compared to December 2018 and 69 bps compared to January 2018. The faster growth of Operating Margin compared to Operating EBITDA Margin may be attributed to slowing depreciation expenses. The drivers of profitability increases are manifold and include:
  • Increases in surgical volumes
  • Slight increases in Net Patient Services Revenue (NPSR) per Discharge, likely due to the increased case complexity of additional surgical volume
  • Declines in Bad Debt expense
  • Declines in FTEs and relatively flat expense growth overall
While these observations paint a hopeful picture for the future, this marks just the second month in the past five with favorable profitability trends. It is becoming clear that past hospital performance is not a reliable predictor of future profitability performance. Kaufman Hall anticipates this instability will continue throughout 2019.
Unless noted, figures are actuals and medians expressed as percentage change
Budget Variance
Month Over Month
Year Over Year
Year Over Year Distributions
(Click to enlarge)
Operating EBITDA Margin
0.3%
5.6%
5.0%
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Operating Margin
7.8%
12.1%
7.5%
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Unless noted, figures are actuals and medians expressed in basis points
Profitability % Change
Profitability Absolute Change
Budget Variance
Month Over Month
Year Over Year
Year Over Year Distributions
(Click to enlarge)
Operating EBITDA Margin
5.0
68.0
50.0
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Operating Margin
35.0
80.5
69.0
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By Region
National Observations
By Bed Size
EBITDA Margin by Bed Size
Medium-sized community hospitals with 200-299 beds experienced the largest year-over-year increases in profitability in January. This cohort continues its monthly trend of outperforming other bed-size cohorts, indicating that these hospitals are able to manage expenses more effectively during times of near-stagnate volume.

Hospitals with more than 500 beds saw almost no changes in profit margin in January 2019 compared to January 2018. This is in contrast to December 2018, when profitability increased for these large hospitals compared to 12 months prior. The nation’s smallest hospitals, those with 0-25 beds, had the largest declines in profitability in January, with an Operating EBITDA Margin loss of more than 200 bps compared to the same time last year.
% Change
Absolute Change
% Change
Absolute Change
By Region
National Observations
By Bed Size
©2018 Kaufman, Hall & Associates, LLC
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