In what's become a common refrain, a new Kaufman Hall report found softening volumes drove profitability declines for U.S. hospitals in August.
Hospitals' operating earnings before interest, taxes, depreciation and amortization (EBITDA) margins fell 9.4%, or 139 basis points, year-over-year, and operating margins declined 11.4% in that time, or 122.5 basis points.
"As was the case in June, hospitals continue to struggle to effectively adjust expenses when volumes flatten in order to maintain sufficient profitability," wrote the report's authors, who were not available for comment.
Kaufman Hall's report included 715 hospitals across all bed sizes and ownership types.
Volumes were mixed in August, with discharges down 1.5% year-over-year and 0.3% compared to budget, but relatively flat month-over-month. Adjusted discharges fell 1.2% year-over-year, but grew 1.8% month-over-month and came in 1% above budget expectations.
Hospitals' average length of stay increased 2.1% year-over-year and exceeded budget by 0.7%. Both emergency department visits and operating room minutes declined, performing 2.8% and 2.6% below budget, respectively, according to the report.
Total expense per adjusted discharge grew 4% year-over-year for the fourth consecutive month, although it declined slightly month-over-month. That's higher than net patient service revenue per adjusted discharge, which grew 3.6% year-over-year. Net patient service revenue per adjusted patient day was flat in that time.
Kaufman Hall noted that much of August's expense growth was in non-labor costs, which rose 3.5% per adjusted discharge year-over-year. Labor expense per adjusted discharge, meanwhile, rose 2.4%.
Hospitals also continue to see their bad debt and charity care climb. That was 5.2% of gross patient revenue year-over-year, or 1.5% above budget in August.
A Fitch Ratings report released last month found not-for-profit hospitals' and health systems' median operating margins bounced back more than 10% in 2018 over the prior year, following two straight years of margin declines, with lower-rated entities seeing the biggest gains. The report's author called it a "very good sign" for the industry.
