July 02, 2019 / ALEX KACIK
Although inpatient admissions have ticked up over the last few months, they remain on a long-term downward trend, which has dented U.S. hospitals’ profitability.
Adjusted patient days were up 3.6% in May compared with the prior-year period, which helped boost operating margins 9.2% along with ongoing cost-cutting efforts, according to Kaufman Hall’s National Hospital Flash Report, which is based on data from more than 600 not-for-profit and for-profit hospitals. But on a rolling 12-month basis, inpatient volumes and emergency department admissions have been declining, said Erik Swanson, a vice president of Kaufman Hall.
“This month and over the last few we have seen some brighter points when it comes to inpatient and ED volumes,” he said. “But one or two points does not make a trend.”
Lower-reimbursed outpatient admissions have increased as inpatient and ED volumes—hospitals’ primary revenue drivers—wane. These swings more acutely impact hospitals with 500-plus beds, researchers found. While larger hospitals in recent months have seen incremental increases in persistently tight margins, they generally have a harder time adjusting their expenses as volume shifts.
Full-time equivalent employees per adjusted occupied bed for large hospitals declined nearly 3% in May year over year, lifting operating earnings before interest, taxes, depreciation and amortization margins a quarter of a percentage point. Over the longer term, larger hospitals’ high overhead and inefficient operating models were masked by high volumes and revenue. But they have been exposed as inpatient volumes have declined, Kaufman Hall found.
Meanwhile, smaller- to medium-size hospitals have been better able to tighten supply and labor expenses as volumes soften. May was the sixth-consecutive month where 100- to 199-bed hospitals saw margin gains due to their ability to manage expenses during times of stagnant revenue growth.
“As hospitals have had to shift more toward outpatient care, they have to re-examine the way they deliver inpatient care to become more efficient and lean,” Swanson said.