Rising expenses, delta variant offset hospital revenue, volume gains: Kaufman Hall

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Although key hospital metrics have seen steady improvements through the first half of the year, the increasing spread of the delta variant, inconsistent vaccination rates and rising expenses are offsetting some of these gains, according to a report released July 30 by healthcare consulting firm Kaufman Hall.

The median hospital operating margin was 2.8 percent in June, not including federal relief funding. With the funding, the operating margin was 4.3 percent in June. 

In the six-month period ending June 30, the median operating margin for hospitals jumped 89.5 percent without provider relief funds compared to the first six months of 2020. However, compared to the first half of 2019, the average operating margin was down 10.3 percent without provider relief funds. 

Additionally, total expense per adjusted discharge fell 2.6 percent from Jan. 1 to June 30, when compared to the first six months of 2020 when hospitals were purchasing large amounts of personal protective equipment. However, compared to the first six months of 2019, total expense per adjusted discharge was up 14.5 percent. 

Hospital volumes were up compared to 2020 but remained down compared to pre-pandemic levels in 2019. For example, adjusted discharges rose 10.1 percent in the first six months of 2021 compared to 2020 but fell 4.4 percent compared to the same period in 2019. Emergency department visits saw the same trend, rising 3.2 percent from January to June of this year compared to the same six-month period in 2020, but falling 14.8 percent from the same period in 2019.

In a positive for the healthcare industry, revenues were up compared to both 2019 and 2020 levels. Gross operating revenue rose 18.2 percent in the first six months of 2021 compared to 2020 and 7.9 percent compared to the same period in 2019. Inpatient revenue was up 11.9 percent in 2021 and 3.3 percent in 2019, and outpatient revenue jumped 24.3 percent and 9.6 percent year to date. 

"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 at Kaufman Hall. "And the increasing spread of the delta COVID-19 variant may stifle further recovery in the coming months."

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