September 2018
Profitability
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EBITDA Margin by Region ?
Operating EBITDA margins were variable by region, with the Midwest achieving the largest year-over-year profitability growth, and the West experiencing the largest declines. All geographic regions performed within 100 bps of budget, signifying financial leaders’ increased accuracy in predicting EBITDA margins.
% Change
Absolute Change
% Change
Absolute Change
National Profitability Observations
For the fourth consecutive month, the National Hospital Flash Report demonstrates strong profitability in the sector. Despite softer performance in July, August performance was solid with a 103 basis points (bps) month-over-month improvement in EBITDA and a 106 bps improvement in Operating Margin. Despite continued flat-to-declining inpatient volumes and revenue, hospitals nationwide are demonstrating strong expense performance.
Of particular note is the 4 percent decline in labor expense and 2 percent decline in non-labor expense year over year. However, as noted last month, the strong profitability performance appears to be unsustainable as hospitals are challenged to continue reducing operational expenses at a faster rate than flat/declining revenues. Without incremental and new sources of revenue, the profitability of the nation’s hospitals will continue to face pressure.
Trends in Operating EBITDA Margin and Operating Margin demonstrated discrepancies. A 2 percent year-over-year improvement in EBITDA, but a 1 percent decline in Operating Margin indicates increasing interest, depreciation, and amortization expense. This trend will continue to be monitored in future reports, including the impact of legacy capital investments on profitability.
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
1.2%
6.5%
2.4%
Operating Margin
1.1%
9.3%
(1.4%)
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
14.0
103.0
45.5
Operating Margin
11.0
106.0
(17.0)
By Region
National Observations
By Bed Size
EBITDA Margin by Bed Size
The continued trend of profitability pressures at the nation’s largest hospitals (those with 500 beds or more) remains concerning. These hospitals appear to have similar revenue pressures as their smaller peers, but have been less successful at managing expenses, particularly in controlling supply and drug expenses. Conversely, hospitals with 100-199 beds continue their strong profitability performance, driven by their ability to manage FTEs while growing patient days.
% Change
Absolute Change
% Change
Absolute Change
By Region
National Observations
By Bed Size
©2018 Kaufman, Hall & Associates, LLC
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