Revenue trends at U.S. hospitals
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Hospital revenue is impacted by numerous factors including patient case complexity, commercial versus government insurance reimbursement, participation in value-based care programs and care moving to ambulatory settings.
In this blog, we review changes in annual net patient revenue and operating expenses to understand current financial trends.
What is the average hospital net patient revenue and operating expense?
According to data from the Definitive Healthcare HospitalView product, average net patient revenue (NPR) at U.S. hospitals increased from $160.9 million in 2015 to $192.8 million in 2020. Between 2015 and 2019, average NPR increased by at least 4% each year. Financial results for 2020 reflect impacts of delays in care related to the COVID-19 pandemic where average NPR was down over one percent.
Average hospital net patient revenue and operating expense
Fig. 1 Data is from the Definitive Healthcare HospitalView product. Data is sourced from the Medicare Cost Report. Results based on 5,145 U.S. hospitals with reported NPR and 5,324 U.S. Hospitals with reported OpEx data each year from 2015 to 2020. Accessed March 2022.
Average hospital operating expenses steadily increased between 2015 and 2020 from $158.1 million to $201.7 million. This represents an average increase of 5% each year. Unlike average NPR, which saw a decrease from 2019 to 2020, average hospital operating expense increased by $8.6 million.
COVID-19 contributes to decrease in average net patient revenue 2019 to 2020
From 2015 to 2020, average hospital net patient revenue grew by almost $32 million—a seemingly positive financial performance trend. However, between 2019 and 2020 average hospital NPR decreased by over 1%. More than likely due to patients postponing care during the COVID-19 pandemic, this was the first decrease in average NPR for hospitals since at least 2006 (first year of HospitalView data).
Average dollar amount increase of hospital NPR and operating expense
Fig. 2 Data is from the Definitive Healthcare HospitalView product. Data is sourced from the Medicare Cost Report. Results based on 5,145 U.S. hospitals with reported NPR and 5,324 U.S. Hospitals with reported OpEx data each year from 2015 to 2020. Accessed March 2022..
The average annual increase in net patient revenue 2015 to 2019 was $8.6 million. Then there was a decrease of about $2.3 million between 2019 and 2020. Even with the slight decrease, the average annual percentage growth of NPR 2015 to 2020 is 3.7%. Operating expenses, however, are increasing by an average of 5% each year, leaving hospitals vulnerable to lower margins.
Large hospitals report smallest net patient revenue impact in 2020
Hospital revenue trends are influenced in large part by hospital bed count. In this case, average net patient revenue correlates directly with hospital bed count—where smaller hospitals with fewer beds report lower dollar amount increases than larger hospitals with more beds.
For example, between 2018 and 2019, the average year-to-year increase in net patient revenue ranges from $1.4 million for hospitals with 25 beds or fewer, and over $42 million for hospitals with 250 beds or more.
Average net patient revenue change by hospital bed count
Fig. 3 Data is from the Definitive Healthcare HospitalView product. Data is sourced from the Medicare Cost Report. Results based on 5,145 U.S. hospitals with reported NPR and 5,324 U.S. Hospitals with reported OpEx data each year from 2015 to 2020. Accessed March 2022.
While smaller hospitals may see lower increases in net year-over-year earnings by dollar amount, a review of the same revenue trends by percentage change indicates strong performance at these facilities.
From 2015 to 2017, hospitals with 25 beds or fewer reported percentage increases in average net patient revenue slightly higher than national averages. The average year-over-year revenue increase 2015 to 2020 for these hospitals is about 3.4%. Hospitals with 26 to 250 beds had lower average rates.
The strongest performance in average net patient revenue increases was for large hospitals (more than 250 beds). Their annual average increase in NPR between 2015 and 2020 is 4.4%. From 2017 to 2019, these hospitals had average net patient revenue increases of over 6%.
Northeast hospitals have largest net patient revenue percentage decrease in 2020
Average net patient revenue change by hospital region
Fig. 4 Data is from the Definitive Healthcare HospitalView product. Data is sourced from the Medicare Cost Report. Results based on 5,145 U.S. hospitals with reported NPR and 5,324 U.S. Hospitals with reported OpEx data each year from 2015 to 2020. Accessed March 2022.
At the regional level, differences in hospital revenue performance emerge. Some regions, such as the Midwest and northeast, saw a dip in hospital NPR growth 2016 to 2017, then experienced larger increases through 2019. The southeast had consistent increases in NPR growth through 2019 while the southwest and west fluctuated.
From 2019 to 2020, hospitals in the northeast had the largest decrease in average NPR at 4%. COVID-19 again plays a contributing factor to this trend as New York City, for example, was an epicenter in spring 2020. Hospitals in the southeast and southwest do not report decreases in NPR in the same time frame.
Average hospital operating expenses increasing
Prior to 2020, hospital operating expenses—including employee salaries, maintenance costs, and other operational fees—rose in parallel with average net patient revenues. From 2019 to 2020, while average hospital NPR fell by over 1%, average hospital operating expense grew by over 4%. In total from 2015 to 2020, the average operating expense for hospital increased by $43.5 million.
Large hospitals report largest operating expense increases
As with trends in net patient revenue, average change in year-over-year operating expense correlates directly with hospital bed count—with smaller hospitals reporting lower increases in dollar amount from year to year. On a percentage change basis, however, smaller hospitals with 25 beds or fewer had similar average increases to operating expense as larger facilities from 2015 to 2019.
Average operating expense change by hospital bed count
Fig. 5 Data is from the Definitive Healthcare HospitalView product. Data is sourced from the Medicare Cost Report. Results based on 5,145 U.S. hospitals with reported NPR and 5,324 U.S. Hospitals with reported OpEx data each year from 2015 to 2020. Accessed March 2022.
Between 2019 and 2020, hospitals of all sizes had an increase in average operating expenses. Hospitals over 250 beds had the highest percentage increase at 5.6%, which is about their average annual increase 2015 to 2020. Hospitals with 26 to 100 beds and 101 to 250 beds had average annual operating expense increases of 3.5% and 3.8%, respectively, from 2015 to 2020.
Hospitals in northeast have highest operating expense increases
Average operating expense change by hospital region
Fig. 6 Data is from the Definitive Healthcare HospitalView product. Data is sourced from the Medicare Cost Report. Results based on 5,145 U.S. hospitals with reported NPR and 5,324 U.S. Hospitals with reported OpEx data each year from 2015 to 2020. Accessed March 2022.
At a regional level, hospitals in both the northeast and west report average year-over-year increases in operating expense by dollar amount that are much higher than national averages. The average annual percentage increase in operating expense between 2015 and 2020 is similar across hospital regions, ranging from 4.5% to 5.7%
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