Hospitals' operating profitability was strong in October, driven by increased volumes, lower uncompensated care and declines in key expense categories, according to Kaufman Hall's latest monthly report on hospital performance.
Hospitals' median operating earnings before interest, taxes, depreciation and amortization margin increased 20% month-over-month in October, and 6% year-over-year. Hospitals' median operating margin grew almost 35% month-over-month, and 10.4% year-over-year.
The biggest EBITDA margin jump was recorded across the smallest hospitals, those with up to 25 beds. Among those hospitals, median operating EBITDA margin grew 15.3% year-over-year. Conversely, that metric fell 1.9% year-over-year across big hospitals with more than 500 beds.
Jim Blake, a managing director with Kaufman Hall and an author of the report, said that smaller hospitals are more volatile, so little things cause bigger movements for them.
"An early bad flu season can move a zero to 25-bed hospital a lot," he said. "Versus with a big complex hospital, it's just a portion of their overall business. They have so many different lines of business that movements are smaller for any one thing."
Despite their success on the earnings front, the smallest hospitals saw the biggest year-over-year drop in discharges, -8.3%, while the largest hospitals were up 5.9% in that time.
The smallest hospitals delivered a strong performance in the patient days category, however, which was up 12.7% year-over-year. All other hospital size categories saw year-over-year growth of less than 4% in the patient days category.
In addition to their small size driving increased variability, hospitals tend to see higher volumes into the winter months, which might explain why some metrics look better when viewed on a month-over-month basis compared with year-over-year, said Erik Swanson, a vice president with Kaufman Hall and an author of the report.
Across all hospitals, discharges increased 1.5% year-over-year and 4.8% month-over-month last month, the report found. Adjusted patient days increased 3.5% year-over-year and 5.1% month-over-month.
On the revenue front, net patient service revenue per adjusted patient discharge increased 1.5% year-over-year and 1.2% month-over-month.
The expense side also brought good news, with labor expense per adjusted discharge down 1.8% year-over-year and 3.1% month-over-month. On an overall basis, labor expenses have been flat to rising, Swanson said. The decline in October was driven mostly by increased volume, he said. However, Kaufman Hall has seen a consistent improvement in labor efficiency across hospitals. In other words, organizations are becoming more efficient in the number of full-time equivalent hours they're using per occupied bed.
The report also found that bad debt and charity care as a percentage of gross revenue was down 4.8% both year-over-year and month-over-month. One month doesn't make a trend, however, and bad debt has risen consistently over the past 18 months as the uninsured rate increases, Swanson said.
Kaufman Hall's monthly report uses actual and budgeted data from more than 800 hospitals of all sizes and ownership types.