Hospital margins positive, if not always sufficient, finds Kaufman Hall flash report

By | July 6, 2019

Overall, hospital margin performance remained positive during the month of May, according to a new flash report released by Kaufman Hall. Operating margins were up 179 basis points compared to April, and 91 bps compared to the same month in 2018.

The positive performance is being driven largely by solid expense management during a period that has seen an increase in patient volumes.

That suggests good news for the healthcare industry generally, but the report is quick to point out that this trend doesn’t necessarily mean that hospital margins are sufficient. And the margins of individual hospitals don’t always reflect those of overall health systems.


Volume performance was strong during the month of May. Adjusted discharges and adjusted patient days both performed above budget, and were both stronger than in May of 2018. Adjusted discharges were 3.6 percent above budget and, and up 1.2 percent year over year, while adjusted patient days were 3.7 percent above budget and up 3.6 percent year over year.

Discharges were in line with budget expectations, but still showed a month-over-month increase of 4%, suggesting that inpatient volumes rebounded from lackluster performance, with overall outpatient volumes continuing to increase.

Revenue indicators showed mixed performance in May. Revenue per unit of service during the month fell short of budget expectations despite a growth in volume.

Expense indicators saw mostly favorable performance compared to budget and month over month, but showed unfavorable performance year over year. Total expense per adjusted discharge increased 1.6% year over year while decreasing 2.8% month over month.

Labor expenses per adjusted discharge increased 2.6 percent compared to the same period last year. Non-labor expense per adjusted discharge rose 2.8 percent year over year, with supply expense and drug expense per adjusted discharge both seeing year-over-year increases of more than 6%.


A drop in the pace of hiring during May surprised some economists; U.S. labor markets added just 75,000 jobs in May, down from 224,000 in April. Municipal fund flows remained strong in May, with investors increasingly moving away from equities and putting their money into bonds.

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