July 2020
Margin
EBITDA Margin by Region *
Including CARES funding, Operating EBITDA Margins were up year-over-year and compared to budget across four of five regions. The Great Plains had the biggest increases, up about 106% both year-over-year and to budget due in part to a 15% increase in surgery volumes. Hospitals in the South had the lowest increases, up 8% year-over-year and 29% above budget, as the region continued to see less-than-expected volumes. The Northeast/Mid-Atlantic had the least favorable variance to budget for Operating EBITDA Margin at 8%, and was the only region to see a year-over-year decrease at 3%. Importantly, the percentage increases in each region are dependent on the size of organizations in a region, with the South having quite a few large organizations and the Great Plains having predominantly smaller hospitals. Given the CARES distributions to high impact, safety-net, and Medicaid and CHIP serving hospitals, the Great Plains and West benefited most from those funds.
% Change
Absolute Change
National Margin Observations
U.S. hospitals and health systems saw margins increase in June as they continued to benefit from federal aid, aggressive cost control efforts, and the recovery of non-urgent surgeries and other services that were cancelled or delayed in the early months of the COVID-19 pandemic.
Median hospital margins held positive for the second consecutive month, following record-poor performance at the onset of the pandemic, when steep volume and revenue declines drove margins deep into the red with the shutdown of many non-urgent services in March and April. In June, funding from the Coronavirus Aid, Relief, and Economic Security (CARES) Act helped drive the median hospital Operating Margin to 11% and the median hospital Operating Earnings Before Interest, Taxes, Depreciation, and Amortization (EBITDA) Margin to 16%. Without the funding, the median Operating Margin was 4% and the median Operating EBITDA Margin was 9%.
It is important to note that these gains are not a guarantee of continued improvement. Considerable uncertainty persists with COVID-19 remaining a stubborn presence, with the possibility that increasing surgery volumes will not be sustained, and with additional emergency funding as yet undetermined.

Including CARES relief, Operating EBITDA Margin jumped 40% or 512 basis points (bps) year-over-year and 44% or 643 bps month-over-month. Operating Margin increased 71% or 604 bps year-over-year and 63% or 684 bps month-over-month. Compared to budget, Operating EBITDA Margin was up 37% or 461 bps and Operating Margin was up 65% or 523 bps. June’s margin results came as hospitals continued to grapple with reduced, but recovering inpatient and emergency department volumes. For the fourth consecutive month, hospitals of all sizes and across all regions saw volumes reduced year-over-year and compared to budget across Discharges, Adjusted Discharges, Adjusted Patient Days, and Emergency Department Visits. Operating Room Minutes were the exception, jumping 41% compared to May 2020 and 6% compared June 2019 as organizations regained surgery volumes from postponed procedures. Including some impact of CARES relief, revenues were up slightly. Total Gross Revenue was up less than 5% year-over-year, Inpatient Revenue rose less than 2%, and Outpatient Revenue was up 1%. Hospitals continued to drive down total expenses through cost control measures, such as staff furloughs, reduced hours, and other efforts. Total Expenses increased just 1% year-over-year and were 3% below budget for the month. Total Labor Expense was slightly up compared to the same period last year but 4% below budget, while Total Non-Labor Expense increased 1% year-over-year and was 3% below budget. Most indicators demonstrated reduced expenses per unit-of-service compared with prior month—with the exception of supplies, as hospitals continue to prepare for future COVID patients.
Unless noted, figures are actuals and medians expressed as percentage change
Budget Variance
Month Over Month
Year Over Year
Year Over Year Distributions
(Click to enlarge)
Operating EBITDA Margin
37.0%
43.9%
40.2%
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Operating Margin
64.9%
63.4%
71.2%
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Unless noted, figures are actuals and medians expressed in basis points
Margin % Change
Margin Absolute Change
Budget Variance
Month Over Month
Year Over Year
Year Over Year Distributions
(Click to enlarge)
Operating EBITDA Margin
460.8
642.7
512.1
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Operating Margin
522.9
683.6
603.7
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*Note: The Kaufman Hall Hospital Operating Margin and Operating EBITDA Margin Indices are comprised of the national median of our dataset adjusted for allocations from corporate, physician, and other entities to the hospitals.
EBITDA Margin by Bed Size
Margins increased year-over-year and compared to budget across five of six bed-size cohorts. The smallest hospitals of 0-25 beds saw the greatest increases, jumping 135% year-over-year and 156% above budget, due in part to revenue increases and below-budget non-labor expenses. The revenue increases for these hospitals came principally as CARES relief issued in June, and an increase in the percent of outpatient revenue as shown by the IP/OP Adjustment Factor.
The four other bed-size cohorts were up 5-34% above budget, and year-over-year increases ranged from a low of 10% for hospitals with 26-29 beds to 41% for those with 100-199 beds. Hospitals with 200-299 beds were 7% above budget, but was the only cohort to see a year-over-year decrease of 3%.
% Change
Absolute Change
©2020 Kaufman, Hall & Associates, LLC
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