July 2018
Profitability
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EBITDA Margin by Region ?
Operating EBITDA was favorable to budget in all regions, with budget variances ranging from 150 to 300 bps of operating EBITDA margin. With respect to year-over-year changes in profitability, every region except the West performed better than the prior year. The Great Plains region experienced the greatest increase in year-over-year profitability, with operating EBITDA margin improving by more than 300 bps compared to last year. The Midwest and South regions experienced operating EBITDA margin improvement of 50 to 100 bps compared to last year, and the Northeast/Atlantic region was essentially equal to last year. The West region experienced operating EBITDA margin declines of nearly 100 bps compared to 2017.
% Change
Absolute Change
% Change
Absolute Change
National Profitability Observations
Hospital sector profitability remained favorable in June. While most organizations budgeted for reduced operating profitability in 2018, overall industry performance is ahead of budget, and outperforming 2017. Both median operating margin and operating EBITDA margin are more than 200 basis points (bps) ahead of budget. Median operating margin improved 53 bps and median operating EBITDA margin improved by 15 bps over the prior year. Deconstruction of the data for regional and size differentials indicates that nearly all cohorts (by size and geography) performed favorably compared to budget, suggesting that healthcare leaders are being conservative in organizational performance expectations in this time of uncertainty.
June represented the final month of the fiscal year for many organizations, and therefore the profitability performance may be reflective of one-time adjustments.
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
10%
2%
2%
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Operating Margin
17%
1%
5%
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Unless noted, figures are actuals and medians expressed in basis points
Profitability % Change
Profitability Absolute Change
Budget Variance
Month Over Month
Year Over Year
Year Over Year Distributions
(Click to enlarge)
Operating EBITDA Margin
226.4
46.0
14.8
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Operating Margin
201.1
4.7
53.0
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By Region
National Observations
By Bed Size
EBITDA Margin by Bed Size
Hospital size did not appear to directly correlate with profitability in the most recent data. Most hospital size cohorts were plus or minus 100 bps of operating EBITDA margin compared to budget. Hospitals with 100-199 beds exceeded budget by approximately 300 bps, and the smallest hospitals with 0-25 beds exceeded budget by nearly 500 bps. With respect to year-over-year changes in profitability, those with 100-199 beds and >500 beds were the highest performing, with both cohorts experiencing operating EBITDA margin improvements of more than 100 bps compared to 2017. Hospitals with 26-99 beds experienced operating EBITDA margin improvement of greater than 50 bps compared to last year, and the cohorts with 0-25 beds and 300-499 beds were essentially equal to last year. The cohort with 200-299 beds experienced operating EBITDA margin declines of nearly 200 bps compared to 2017. The variability of performance by size cohort to budget and actual suggests the need for more precise methods to anticipate profitability changes. This is particularly apparent when examining variability of performance to budget in labor and supply expense.
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Absolute Change
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By Region
National Observations
By Bed Size
©2018 Kaufman, Hall & Associates, LLC
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