January 2019
Profitability
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EBITDA Margin by Region ?
The Northeast and Great Plains regions experienced the greatest profitability declines in December 2018, with Operating EBIDTA declining by approximately 50 bps in each region. Conversely, the Midwest region experienced the greatest profitability gains for the fifth consecutive month, with a more than 20 percent year-over-year profitability increase. Large Midwest hospitals appeared to be the market leaders at the end of 2018 as a result.
% Change
Absolute Change
% Change
Absolute Change
National Profitability Observations
Unfavorable profitability trends during the final third of 2018 are concerning. Hospital profitability declined in December 2018 compared to November, marking the third of the last four months to see profitability declines. Operating EBITDA Margin declined 21 basis points (bps) and Operating Margin declined 1 bps month-over-month. The rate of performance decline did slow in December—for example, Operating EBITDA Margin was down only 2.1 percent month-over-month, compared to 3.9 percent month-over-month in November. While inpatient volumes were up in December, Net Patient Revenue was nearly flat. Increases in Labor Expense, and Bad Debt and Charity Care, also contributed to profitability declines.
While December 2018 profitability was higher than December 2017, the positive variance in year-over-year performance eroded. Specifically, November 2018 Operating EBITDA Margin was 159 bps or 13.6 percent ahead of prior year, and December 2018 Operating EBITDA Margin was only 103 bps, or 6.7 percent ahead of prior year.
The bright spot in the December data was the strong management of supply, drug, and purchased services expenses. Kaufman Hall anticipates instability to continue for the sector in 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
1.6%
(2.1%)
6.7%
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Operating Margin
2.8%
(1.0%)
9.2%
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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
20.0
(21.0)
102.5
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Operating Margin
20.0
(1.0)
80.0
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By Region
National Observations
By Bed Size
EBITDA Margin by Bed Size
For the first time in six months, hospitals with more than 500 beds experienced profitability increases compared to 12 months prior. This cohort increased Operating EBITDA Margin by nearly 50 bps in December, due to large hospitals’ ability to grow revenue at a faster pace than expenses. We will continue to monitor this trend in 2019.
The hospital cohorts with the greatest increases in profitability compared to December 2017, however, were those with 26-99 and 200-299 beds. These groups increased Operating EBITDA Margin by more than 150 bps. Only the smallest organizations (bed sizes 0-25 and 26-99) experienced profitability favorable to their budgets.
% Change
Absolute Change
% Change
Absolute Change
By Region
National Observations
By Bed Size
©2018 Kaufman, Hall & Associates, LLC
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