The sell-side was out with a survey yesterday suggesting volumes were soft in April. PMI tells a different story and the difference may be timing of the two surveys. Also, as Tom Tobin has noted in the context of HCA, contract labor costs are receding and non-COVID occupancy suggests a return of more normal operations in late April and early May. Another confounding factor is also likely to be the different impact labor and supply costs have had on non-profit hospital systems versus the more rigorously run for-profits.
It has been an open secret for a while that most not-for profit hospitals have poor cost controls. Their access to revenue streams not available to for-profit operators has probably contributed to their sloth. Some are better than others. Ascension is widely known as a low-cost operator in most markets. Academic medical centers are high cost, often extremely so.
The large non-profits like Ascension and CommonSpirit released their quarterly earnings last week. Margins at CommonSpirit are down 11.5% as compared to 1Q 2021. Ascension reports a (3.1%) operating margin for the nine months ending March 31, 2022 versus 3.8% for the nine months ending March 31, 2021.
Surveys that include NFPs are likely to skew more negative as it will take more volume and higher acuity relative to the for-profit operators to overcome structural cost challenges.
Let me know if you have any questions.
Emily Evans
Managing Director – Health Policy
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