June 2019
Profitability
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EBITDA Margin by Region ?
The Midwest continues to outpace the rest of the country in year-over-year margin growth. The region experienced an Operating EBITDA Margin increase of about 12 percent compared to May 2018. This was driven by revenue growth approximately four times the rate of expenses. Hospitals in most regions improved margins, with the exception of those in the Northeast/Mid-Atlantic.
% Change
Absolute Change
% Change
Absolute Change
National Profitability Observations
Trends in hospital margins remained positive in May, with Operating Margins up 179 basis points (bps) compared to April and 91 bps compared to the same time last year. This performance is driven by solid expense management—particularly for labor expenses—during a period of increased patient volumes. Volume increases did not translate to bottom line revenue growth, however, as revenues were stagnant month over month.
For the second consecutive month, the margin performance was not anticipated, as Operating Margins were 4.2 percent (30 bps) favorable to budgets. We continue to monitor this trend, as extended periods of performance favorable to budget could have unintended effects on an organization’s decision making around operational controls and capital planning.
While these trends are generally good news for the industry, margin improvements do not necessarily mean that hospitals are achieving sufficient margins. Also, margins of individual hospitals within a system—as highlighted in this report—do not necessarily reflect those of the overall system.
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
3.6%
8.0%
7.5%
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Operating Margin
4.2%
25.1%
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
32.5
137.0
105.0
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Operating Margin
30.0
179.0
91.0
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By Region
National Observations
By Bed Size
EBITDA Margin by Bed Size
The nation’s largest hospitals (500 beds or more) experienced margin gains for the second consecutive month. These large organizations experienced inpatient and outpatient volume increases, while simultaneously managing labor productivity. Additionally, these facilities experienced a more than 10 percent decrease in Bad Debt and Charity Care compared to the same period in 2018.
Also for the second consecutive month, hospitals with 300-499 beds experienced year-over-year margin declines. Despite volume increases, this bed-size cohort had increases in expenses, particularly in non-labor areas.
The remaining bed-size cohorts (0-25, 26-99, 100-199, and 200-299) also experienced year-over-year margin gains in May. For hospitals with 100-199 beds, May marks the sixth consecutive month the cohort saw margin gains. This trend is driven by the ability of these hospitals to manage expenses during times of stagnant revenue growth.
% Change
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By Region
National Observations
By Bed Size
©2019 Kaufman, Hall & Associates, LLC
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