Weak Volume Revenue Causes Profitability to Decline in Hospitals

As hospitals closed their books at the end of 2019, they experienced a significant increase in their expenses. They also reported a decline in volume and very low turnover.

Both of these combined caused the hospitals to generate a very low profit. 

The total income after taxes, depreciation, and interest, was less compared to prior months. The profits were decreased by a significant margin. 

High expenses and weak volumes proved to be extremely stressful for hospitals. 

Which in turn caused a high alert situation. It was reported that expenses are getting out of control and fluctuating numbers are causing profitability decline.

The end of 2019 was not very profitable in terms of revenue. 

Surprisingly in November hospital expenses rose by over 2.7 percent per year. This included the cost of labor, non-labor, services, and many other expenses as well. While yearly expenses were very apparent, month to month expenses showed a very prominent slope upwards as well. 

By the start of December labor and non-labor expenses rose by a great margin.

The labor discharge was adjusted by 4.9 percent per year and 7.3 percent month over month. 

While non-labor charges were reported at 2.8 percent per year and 5.1 percent month by month. 

Even purchased services were significantly expensive as compared to the other months. 

However, high expenses were not the only culprit behind less profit. Weak volumes were also causing a decline in income. Hospitals are not used to dealing with fluctuating numbers with such a high margin.

In fact, hospitals all over the nation experienced very low traffic in their operating rooms as well as emergency rooms in November 2019. Almost a 9.4 percent decline was reported in operating room minutes and 7.6 percent patient decrease overall.

Another thing that experienced a significant hit was room expenses. 

Patients were admitted for a longer time than usual, which caused the room expenses to skyrocket. Patient discharge rate saw an increase of 0.3 per month and 1.4 percent month by month. 

Net Patient Service Revenue only increased by 0.4 percent per month, however, it was flat month by month. In and outpatient revenue decreased by 2.6 percent month by month.

However gross bad debt and charity decreased all over. The key performance indicator fell by 0.4 percent per month and 0.8 percent month by month.

Even though high margins of profit took a negative turn at the end of 2019. It is expected to get better by the first quarter of 2020.

One thing to take out of this is to ensure that expenses stay under control to create a healthy profit. A decrease in profit will only cause hospitals to work in an in-efficient manner. Weak volume revenues paired with high expenses are causing hospitals to experience a decline in profits. 

Hospitals need to plan their numbers in a better and more efficient way to ensure that their organization does not experience fluctuation. Setting goals for month by month expenses and volumes will help greatly with profit.

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