One year after reporting that half of the nation's hospitals were running red ink, a new study released this morning finds that 80% of hospitals are back in black, with overall margins approaching levels not seen since the economy tanked.
"If they had a 401(k) statement to look at, it'd be lower than it was two years ago. But in terms of the operational financial statistics like margins and liquidity, it looks like hospitals in large part have returned to prerecession conditions," says Gary Pickens, chief research officer at the Center for Healthcare Improvement at Thomson Reuters, which produced the study.
"The market conditions have improved. Investment income is back. Hospitals no longer have to take realized losses. From a liquidity perspective, we have seen cash on hand rebound pretty substantially."
The study tracked 439 hospitals nationwide for key indicators, such as operating and total margins, reimbursement rates, patient volume, hospital employment and layoffs, and elective procedures through the second quarter of 2009.
The study found that:
Pickens says he's been most impressed by hospitals' ability to manage expenses throughout the downturn, not necessarily through draconian reductions like layoffs but with a greater focus on efficiencies. "It seems like hospitals have risen to the challenge and have been able to manage their expenses effectively. Have they reduced salaries? No. Have they reduced the per-patient staffing? No. What they appear to have done is decrease length of stay by 2% to 3%," he says.
"It remains to be seen if that is an overall positive and sustainable with respect to quality. We have to look at make sure that hasn't resulted in a bounce back in the form of higher readmissions. But that appears to be one way they have been able to decrease labor expense, by managing patients in the hospital out more rapidly."