Hospitals saw increased profitability as 2019 came to a close

By | February 12, 2020

Based on December 2019 data, U.S. hospitals ended the year on a strong note, with increases in net patient revenue and service volumes contributing to improved profitability, according to the latest Kaufman Hall Flash Report. Margins rebounded after a significant decline in November.

Operating earnings before interest, taxes, depreciation and amortization margin rose 136.9 basis points (bps) year over year, and operating margin increased 171.8 bps. Month over month, operating EBITDA margin increased 173.4 bps, while operating margin rose 208.7 bps.

Multiple factors contributed to the increases, including higher volumes and revenues, despite increases in bad debt and charity care and mixed performance on expenses.

By size, the largest hospitals with 500 beds or more were the only ones to perform below budget for the month. Despite that, they saw their first year-over-year operating EBITDA margin increase in six months.


After declines in November, volumes increased in December, and operating room minutes saw the most significant year-over-year increases at 5.7%, while emergency department visits saw the most significant month-over-month increases at 11.3%.

Discharges increased 0.4% year over year and 4.1% month over month, but was the only volume metric to perform below budget expectations.

Revenue performance for December was somewhat mixed, with increases and decreases across net patient service revenue per adjusted patient day and inpatient/outpatient (IP/OP) adjustment factor, and across-the-board increases in NPSR per adjusted discharge and bad debt and charity as a percent of gross.

NPSR per Adjusted Discharge was up 3.3% year over year and 1.2% month over month, performing 1% to budget — mirroring similar patterns in adjusted discharges. NPSR per adjusted patient day fell slightly at -0.6% year over year, but increased slightly at 0.2% month over month, falling 3.8% below budget expectations despite across-the-board increases in adjusted patient days.

Hospitals nationwide saw expenses increase year over year across most metrics in December, but decrease month over month. Total expense per adjusted discharge rose 0.8% year over year, but fell 1.8% month over month. Labor expense per adjusted discharge rose 1.3% year over year, but fell 1.9% month over month. Full-time equivalents (FTEs) per adjusted occupied bed were down 4% year over year and 1.5% month over month.

Non-labor expense per adjusted discharge rose 0.7% year over year, but fell 1.7% month over month. Drug expense per adjusted discharge saw the biggest year-over-year increase at 9.7%, while supply expense per adjusted discharge was up 6.2% year over year.


The numbers are a turnaround from December 2018 figures, which showed an overall trend of declining profitability. The only bright spots in 2018 were the summer months, which tended to be stronger on the profitability front.

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