Economists have not declared an end to the Great Recession, but one early look at not-for-profit hospital operating performance in fiscal 2009 shows some emerged through the worst of the economic downturn with margins no worse off.
Not surprisingly, revenue growth slowed for the second straight year in 2009 among the roughly 200 not-for-profit hospitals and systems reviewed by Moody's Investors Service. The median operating revenue growth dropped to 6.5% for the fiscal year from 7.1%.
Yet the median operating margin inched upward to 2.2% from 2% the prior year. That's because hospital expense growth slowed sharply to 6.4% in 2009 from 7.6% the prior year.
Moody's declined to comment on the flagging expense growth because the medians are preliminary. Hospitals and systems in Moody's analysis closed their books on the fiscal year by Sept. 30 or earlier. Hospitals that end the year in December, which are concentrated in struggling states, will likely drag down medians.
But the preliminary figures echo other recent reports by all three ratings agencies that noted stable or improved hospital operations in 2009 thanks to spending cuts. Some efforts have made headlines, such as construction delays and layoffs. Hospitals also froze wages, cut spending on supplies and equipment and closed or cut unprofitable services in response to the recession, say ratings agencies.
Analysts doubt whether hospitals can sustain cuts or further reduce expenses. Executives at the Mayo Clinic said as much to Moody's analysts earlier in the year. The Rochester, Minn., has lifted a wage freeze for doctors that helped hold expenses flat in 2009 to give Mayo its strongest operating margin since 2004.