REPORT: Assessment Shows COVID-19’s Cascading Financial Damage to Hospitals

Kaufman Hall

April was brutal for the nation’s hospitals as they felt the cascading effects of the first full month of COVID-19’s impacts. Steep volume and revenue declines drove record-poor margin performance for hospitals nationwide, with median Operating Margin and Operating EBITDA Margin, as represented by Kaufman Hall’s indices, falling to –29% and –19%, respectively for April.

Operating EBITDA Margins fell 174% or 2791 basis points (bps) compared to the same period last year and 118% or 1152 bps compared to March, while Operating Margins fell a whopping 282% or 3025 bps year-over-year and 120% or 1344 bps compared to March. According to the Kaufman Hall’s Hospital Operating EBITDA Margin Index, the median national Hospital Operating EBITDA Margin fell from 6.5% in February to –5% in March, and to –19% in April.

April’s devastating results follow a challenging March, when hospitals first saw the pandemic’s impacts drive across-the-board volume declines starting mid-month. Due to government prohibitions and the desire to stem COVID’s spread, many hospitals were unable to resume elective and non-urgent cases in April, causing year-over-year volume declines more than double those seen in March.

Volumes were down significantly across most metrics in April. As non-urgent procedures continued to be deferred, Operating Room Minutes fell 61% compared to April 2019—more than triple the declines seen the month before. Discharges fell 30% year-over-year, and Emergency Department (ED) Visits dropped 43%.

Revenue results were down across most measures in April, but outpatient services took the biggest hit. Outpatient Revenues fell 50% year-over-year and 51% below budget, while Inpatient Revenues declined 25% year-over-year and 30% below budget.

Expenses remained high in April relative to the much lower numbers of patients. Total Expense per Adjusted Discharge rose 59% year-over-year, while Labor Expense per Adjusted Discharge was up 63% and Non-Labor Expense per Adjusted Discharge rose 58%. While total expenses declined slightly, those decreases did not come close to keeping up with steep volume declines. This suggests that hospitals’ efforts to reduce costs through mass furloughs, significant pay cuts for executives, and other measures have been insufficient thus far to make up for lost volumes.

Looking at Non-Operating performance, equities saw a sharp recovery in April with hopes that the pandemic’s impacts would be less severe than originally predicted, following a historic collapse in March. The U.S. economy continued to falter, however, with more than 30 million unemployment claims filed by early May, as many businesses remained closed.

April saw nearly $4 billion of municipal fund outflows, continuing a streak of withdrawal from March. ISM Purchasing Manager Indexes — economic indicators of the manufacturing and service sectors — soured to 41.5% in April, representing a sharp contraction. Economic uncertainties remain, as Fed Chairman Jerome Powell said in mid-May: “The recovery may come more slowly than we would like.”

West Region, Operating EBITDA Margin:

  • Year-Over-Year Basis Point Change: -2196.33
  • Budget Variance Basis Point Difference: -1687.32
  • Year-Over-Year % Change: -101.35%
  • Budget Variance % Difference: -96.86%

For more statistics and details, please see the May issue of Kaufman Hall’s National Hospital Flash Report,

Kaufman Hall provides a unique combination of software, management consulting and data solutions to help society’s foundational institutions realize sustained success amid changing market conditions. Since 1985, Kaufman Hall has been a trusted advisor to boards and executive management teams, helping them incorporate proven methods, rigorous analytics and industry-leading solutions into their strategic planning and financial management processes, with a focus on achieving their most challenging goals.

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