Delta variant squeezes hospital margins
The COVID-19 delta variant is offsetting improvements in hospital volume and revenue, putting continued pressure on margins.
That’s according to the latest issue of Kaufman Hall’s National Hospital Flash Report, which looked at June data from more than 900 hospitals.
Hospitals and health systems experienced a significant decline in revenue in 2020 when routine and elective medical procedures were temporarily halted due to COVID. Compared to those early months of the pandemic, key performance metrics improved in June 2021. However, expenses were above 2019 levels.
Fortunately, revenues were above both 2020 and 2019 levels, but uncertainties around the delta variant still remain.
“Rising expenses are contributing to relatively tight hospital margins, even as revenues and volumes continue to show signs of improvement,” said Erik Swanson, senior vice president of data and analytics with Kaufman Hall. “And the increasing spread of the delta COVID-19 variant may stifle further recovery in the coming months.”
Actual margins, excluding funding from the federal Coronavirus Aid, Relief, and Economic Security (CARES) Act, were 2.8% in June, according to the Kaufman Hall hospital Operating Margin Index. Including funding, margins were 4.3%. In good news for hospitals, operating margin was up 89.5% year to date compared to the first six months of 2020, not including CARES funding. Compared to the first six months of 2019, operating margin was down 10.3%.
Hospitals weren’t facing as high expenses compared to the first six months of 2020, when large purchases of personal protective equipment were necessary. However, total expense per adjusted discharge was up 14.5% in June compared to the first six months in 2019. Similarly, overall patient volumes were elevated compared to 2020, but still down when compared to 2019.
Hospitals did see higher revenues in June compared to both 2019 and 2020, but higher expenses are likely taking their toll. Gross operating revenue was up 18.2% year to date from 2020 and 7.9% from 2019. Inpatient revenue was up 11.9% from 2020 and 3.3% from 2019. Outpatient revenues jumped 24.3% from 2020 and 9.6% from 2019.
Amy joined TriMed Media as a Senior Writer for HealthExec after covering home care for three years. When not writing about all things healthcare, she fulfills her lifelong dream of becoming a pirate by sailing in regattas and enjoying rum. Fun fact: she sailed 333 miles across Lake Michigan in the Chicago Yacht Club "Race to Mackinac."