The study found that the median profit margin of U.S. hospitals increased from near zero in the third quarter of 2008 to more than 8 percent in the second quarter of 2009.
According to the study, the recovery has been broad-based, with all classes of hospitals — small, medium and large community hospitals, teaching hospitals and major teaching hospitals — showing positive median margins.
The study tracked two dozen key financial indicators, using proprietary and public data to analyze the balance sheets of more than 400 hospitals nationwide. The study then evaluated trends in revenue and profit, employment levels, closures, inpatient volume, days cash on hand and case mix to gauge the fiscal health of the nation’s hospitals.
Following are the key findings of the analysis:
• Total margins increase: Median total margins were at 0.37 percent in the third quarter of 2008, in the second quarter of 2009 they reached 8.4 percent.
• 20 percent of hospitals still in the red: About 20 percent of hospitals had negative total margins in second quarter of 2009, which is similar to the rate seen before the recession began in late 2007. This is an improvement from the first quarter of 2009, when 30 percent of hospitals were operating with negative margins, and the third quarter of 2008, when half of U.S. hospitals were operating in the red.
• Liquidity improves significantly: Hospitals’ median days-cash-on-hand has increased significantly from 90 days in the first quarter of 2009 to 146 days in the second quarter of 2009, which is higher than the historic long-term average.
• Labor costs cut by reducing length of stay: While hospitals have maintained a consistent ratio of staffing levels per occupied bed throughout the recession, total labor costs are down approximately 2.25 percent in the second quarter of 2009. This reduction in labor expense per discharge has been achieved by reduction of patient length of stay.
• Hospital admissions increase: Mean patient discharge volumes for all hospitals began declining shortly after the recession started but moved into positive territory in the second quarter of 2009.
Read the release on the Thomson Reuters hospital fiscal health study.
