Moody's: 132 Statistics on Nonprofit Hospital Medians

Last week, Moody's Investors Service issued its annual medians report for nonprofit hospitals, finding that providers had a strong balance sheet in fiscal year 2012 but profitability metrics were down compared with FY 2011.

For the first time since FY 2008, Moody's found expenses outpaced revenue in nonprofit hospitals and health systems. Overall, median operating revenue growth dropped from 5.4 percent in 2011 to 5.2 percent in 2012. Net patient revenue growth dropped to 4.7 percent, more than a half-percent lower from 2011.

Balance sheets remained strong due to better returns from investments and more prudent capital spending — and Moody's analysts said strong cash reserves are "an important credit factor while operating in a period of unpredictability."

Several other trends bubbled to the surface after analyzing Moody's most recent hospital metrics, including the following:

•    Observation stays continue to increase heavily at hospitals as Medicare auditors continue to scrutinize how hospitals are labeling inpatient care.

•    Although net patient revenue still had a positive growth rate, the main profitability ratios fell from 2011, including average overall profit, average operating profit, average operating margin and average operating cash flow margin.

•    Hospitals' exposure to governmental payers increased last year at the expense of commercial payers.

•    In May, Moody's announced it would use several new credit rating indicators to better capture evolving payment and care models as the sector transitions to pay-for-performance. Within the new indicators, Moody's found that the number of covered lives increased dramatically for Medicare beneficiaries, due in large part to the proliferation of accountable care organizations. Medicare and all-payer readmission rates also decreased significantly from 2011 to 2012.

With roughly two-thirds of FY 2013 in the books, Moody's expects hospitals will continue to experience weak operating and financial metrics, thus reinforcing the credit rating agency's negative outlook of the sector. Here are 132 statistics on nonprofit hospital and health system medians, comparing FY 2011 with FY 2012.

Note: The following data are based on audited FY 2012 financial statements for 402 freestanding hospitals, single-state health systems and multistate health systems within Moody's database. Utilization and liquidity statistics are based on a smaller sample size where five years of consistent data are available. Moody's factored in the new accounting standard, which required hospitals to present bad debt as a deduction from patient service revenue starting in fiscal years ending Dec. 31, 2012. Figures vary slightly from last year's report because Moody's included multistate health systems into one overarching portfolio. Roughly half of the hospitals in the data set are "A"-rated organizations. Authors of the report are Deepa Patel, Lisa Goldstein, Kendra Smith and Jonathan Santana.

 

Utilization

 

Category

FY 2011

FY 2012

Maintained beds

427

421

Admissions

23,394

24,262

Observation stays

4,706

5,218

Patient days

109,065

109,330

Average length of stay

4.7 days

4.6 days

Maintained bed occupancy

65.2 percent

63.5 percent

Emergency room visits

76,974

81,703

Outpatient visits

294,036

291,039

Outpatient surgeries

10,492

10,516

Medicare case mix index

1.59

1.59

 

Financial performance

 

Category

FY 2011

FY 2012

Net patient revenues

$470.7 million

$488.2 million

Total operating revenue

$499.9 million

$527.6 million

Interest expense

$7.7 million

$8.1 million

Depreciation and amortization expense

$29.1 million

$29.8 million

Total operating expenses

$488 million

$506.6 million

Income from operations

$14.7 million

$13.4 million

Excess of revenue over expenses

$30.4 million

$29.8 million

Net revenue available for debt service

$66.3 million

$68.3 million

Operating cash flow

$51.7 million

$52.3 million

Debt service

$15.6 million

$15.5 million

Additions to property, plan & equipment

$37.3 million

$39 million

 

Balance sheet

 

Category

FY 2011

FY 2012

Unrestricted cash and investments

$235.7 million

$257.8 million

Net fixed assets

$278.6 million

$305.4 million

Total comprehensive debt

$278.8 million

$294.5 million

Unrestricted net assets

$320.7 million

$331.9 million

Monthly liquidity

$239.1 million

$254.9 million

Annual liquidity

$255.9 million

$264.8 million

 

Key ratios

 

Category

FY 2011

FY 2012

Operating margin

2.7 percent

2.5 percent

Excess margin

5.1 percent

5.2 percent

Operating cash flow margin

9.9 percent

9.5 percent

Cash on hand

179.2 days

185.3 days

Return on assets

4.5 percent

4.3 percent

Annual debt service coverage

4.5x

4.6x

Maximum annual debt service coverage

4.2x

4.3x

Current ratio

1.9x

1.9x

Cushion ratio

15.5x

16.2x

Cash-to-debt ratio

119.2 percent

126.2 percent

Accounts receivable

45 days

49.9 days

Average payment period

59.3 days

64.3 days

Debt-to-capitalization ratio

39.4 percent

38.9 percent

Debt-to-cash flow

3.4x

3.4x

Average age of plant

10.5 years

10.6 years

Capital spending ratio

1.2x

1.2x

Debt-to-total revenue

38 percent

37.6 percent

Three-year operating revenue CAGR

5.4 percent

5.1 percent

 

Patient revenue sources by gross revenue

 

Category

FY 2011

FY 2012

Medicare

43.7 percent

44.1 percent

Medicaid

13 percent

13.1 percent

Blue Cross/commercial/managed care

33.8 percent

33.4 percent

Self-pay and other

7.7 percent

7.6 percent

 

New analytical indicator medians

 

Reimbursement methods
(% of net patient revenue)

FY 2011

FY 2012

Traditional capitation

0.9 percent

0.7 percent

DRG

37.9 percent

38.9 percent

Percent of charges

18.5 percent

19.8 percent

Fee schedule

19.3 percent

19 percent

Per diem

3.4 percent

4.3 percent

Risk-based or other

1.9 percent

1.8 percent

Other

8.6 percent

8 percent

Number of covered lives

FY 2011

FY 2012

Medicare

13,900

30,440

Medicaid

24,902

26,988

Commercial

48,728

53,728

New hospital utilization data

FY 2011

FY 2012

Unique patients

120,335

121,689

Medicare readmission rate

12.8 percent

12.1 percent

Overall readmission rate

10.3 percent

9.8 percent

Total case mix index

1.4

1.4

Number of employed physicians

154

171

Worked RVUs for employed physicians

154,783

182,154

Active medical staff
(independent and employed)

592

575

 

More Articles on Hospital Financial Data:
S&P: 34 Statistics on Nonprofit Standalone Hospital Medians
Fitch: Nonprofit Hospital Liquidity Metrics Improved in 2012
S&P: 34 Statistics on Nonprofit Health System Medians

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