U.S. hospitals experienced margin declines in February, following moderate declines in January. For many organizations, it was the last month of business as usual before coming face-to-face with the impacts of unprecedented demands as COVID-19 cases mount nationwide. Operating Earnings Before Interest, Taxes, Depreciation, and Amortization (EBITDA) Margin fell -92.7 basis points (bps) year over year in February, and -105.2 bps below budget.

Operating Margin was down -73.2 bps year over year, and -92.4 bps below budget. Looking month over month, Operating EBITDA Margin was down -162.9 bps, and Operating Margin fell -206.4 bps. Lower volumes compared to January and higher expenses contributed to the decreasing margins. The COVID-19 pandemic will dramatically change the picture across all metrics in the coming months.



The nation’s hospitals saw volumes increase across all measures in February compared to the same period in 2019, but decrease across most measures compared to January. Discharges were up 1.1 percent, Adjusted Discharges rose 2.7 percent, and Adjusted Patient Days rose 6.3 percent. Average Length of Stay (LOS) increased 1.9 percent compared to February 2019, while ED Visits were up 3.0 percent, and Operating Room (OR) Minutes rose just 0.7 percent.

Month over month, OR Minutes saw the biggest year-over-year decrease at -9.7 percent. Average LOS was the only volume metric to see a slight month-over-month increase of 0.7 percent. Even so, most metrics performed above budget expectations.


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Revenues were up for most metrics, both year over year and month over month. Net Patient Service Revenue (NPSR) per Adjusted Discharge rose 3.0 percent year over year and 0.7 percent month over month, and was slightly above budget at 0.2 percent. NPSR per Adjusted Patient Day rose just 0.1 percent year over year and 0.9 percent month over month, but was -3.0 percent below budget.

The Inpatient/Outpatient (IP/OP) Adjustment Factor rose 2.5 percent year over year and 0.7 percent month over month. Bad Debt and Charity as a Percent of Gross rose 1.5 percent compared to February 2019, but was the only metric to fall -0.7 percent compared to January 2020.



Hospitals saw expenses increase in February. Total Expense per Adjusted Discharge rose 2.2 percent year over year and 3.3 percent month over month. Labor Expense per Adjusted Discharge had the biggest year-over-year increase at 3.4 percent, and rose 1.6 percent month over month. Full-Time Equivalents (FTEs) per Adjusted Occupied Bed (AOB) was the only expense metric to see a slight year-over-year decline, at -0.4 percent.

Non-Labor Expense per Adjusted Discharge rose 0.7 percent year over year, and 4.3 percent month over month. Supply Expense per Adjusted Discharge rose 2.3 percent year over year, but was essentially flat month over month. Drug Expense per Adjusted Discharge rose 2.4 percent compared to February 2019, but was down -1.1 percent compared to January 2020. Purchased Service Expense per Adjusted Discharge saw the biggest month-over-month increase at 8.5 percent.



February was marked by volatility and uncertainty for Wall Street. Equities began the month on strong footing, but the unprecedented bull run quickly came to a halt as the spread of COVID-19 led to a selloff in equities. The S&P 500 fell 8.4 percent in February, after reaching all-time highs earlier in the month. At publishing time, the index was 18.8 percent off of its February starting point at 2,954.22.

Nonfarm payrolls added 273,000 jobs in February—including 32,000 in healthcare—bringing unemployment to a 50-year low of 3.5 percent. The 10-year Treasury bond ended February at a record low 1.15 percent, while the 30-year MMD declined 28 bps month over month to 1.52 percent. Municipal fund flows saw a stark reversal in March to date, as repercussions of the pandemic drove a whipsaw in rates and dislocation of the municipal versus treasury ratio market.