Hospital margins remain tight as industry pulls out of pandemic

The Delta variant and rising expenses is offsetting gains in revenue and patient volume.

Hospitals in the U.S. continued to experience tight margins in June as the pandemic continues to squeeze the healthcare industry.

According to a news release on the latest issue of the Kaufman Hall’s National Hospital Flash Report, key performance metrics improved in June over the depths seen in the early months of the COVID-19 pandemic, but expenses have also risen higher than levels seen in 2019. Adding to the pressure, COVID-19 infections tied to the more easily transmissible Delta variant have increased dramatically while vaccination rates have stagnated.

The median Kaufman Hall hospital operating margin Index was 2.8 percent in June, without federal CARES Act funding and 4.3 percent with the funding. When compared to the first six months of 2020, the margin jumped 89.5 percent year to date (YTD) without CARES Act funding, and 48.7 percent YTD with the funding. Compared to 2019, margins were down 10.3 percent YTD without the federal funding and rose 3.7 percent YTD with the funding, the release says.

Expenses per adjusted discharge fell 2.6 percent from January to June 2021 compared to the year prior which saw massive spending on equipment to deal with the COVID-19 pandemic but was up 14.5 percent compared to the first six months of 2019. Adjusted discharges also saw an increase of 10.1 YTD compared to a 4.4 drop compared to the same period in 2019, according to the release.

“Rising expenses are contributing to relatively tight hospital margins, even as revenues and volumes continue to show signs of improvement,” Erik Swanson, senior vice president of Data and Analytics with Kaufman Hall, says in the release. “And the increasing spread of the Delta COVID-19 variant may stifle further recovery in the coming months.”