Reviewing hospital financial performance - average U.S. hospital EBITDA
With rising healthcare costs – from medical supplies to salary expenses – and thin operating margins, hospital leaders and executives always keep a close eye on their financial spreadsheets.
In accounting, EBITDA, or earnings before interest, taxes, depreciation, and amortization, is a variation of operating income that can indicate levels of an organization’s cash flow.
In the Definitive Healthcare HospitalView product, we calculate EBITDA using metrics from the Medicare Cost Report (MCR). This Healthcare Insight reviews hospital EBITDA based on hospital size and geographic location. Results in this analysis are according to the last five calendar years of hospital financial performance tracked in our database.
Average hospital EBITDA
What is the average U.S. hospital EBITDA?
The average hospital EBITDA in 2021 was about $6.0 million. In 2020, the average hospital EBITDA was -$2.2 million, likely reflecting drops in their margins from reduced capacity and delays in care or increasing costs as a result of the COVID-19 pandemic.
Between 2017 and 2020, EBITDA as a percent of net patient revenue averaged more than 4% each year. That ratio dropped to -1% in 2020 and nearly reached 3% in 2021.
Hospital EBITDA by bed size
How does hospital EBITDA differ by hospital size?
Larger hospitals – those with more than 250 patient beds – have higher EBITDA likely due to their higher revenues and expenses overall compared to smaller hospitals. More beds means the hospital can see more patients and earn more revenue.
However, hospitals with between 26 and 250 beds have the highest average EBITDA as a percentage of net patient revenue, at 5.3% to 5.4%. The higher EBITDA percentages correlate to operating margins by bed size where hospitals of these sizes had positive margins compared to the smallest and largest hospitals across the country.
Hospital EBITDA by region
How does hospital EBITDA differ by location?
Hospitals in the northeastern U.S. have the lowest average EBITDA by dollar amount and percent of net patient revenue. From our previous analyses on revenue and expenses, we know hospitals in this region had some of the biggest decreases in net patient revenue and highest increases in expenses over the last few years, which is reflected in the EBITDA results.
Hospitals in the southeast, southwest, and Midwest have average EBITDA as a percent of net patient revenue values higher than the national average of 2.9%.
What is hospital EBITDA?
EBITDA stands for “earnings before interest, tax, depreciation, and amortization”. The financial metric excludes certain non-cash expenses to help show financial performance in a slightly different way. EBITDA is not a generally accepted accounting principle (GAAP) and is used more often in some industries than others.
How is hospital EBITDA calculated?
In the HospitalView product, Definitive Healthcare uses metrics from the Medicare Cost Report and calculates hospital EBITDA as:
Hospital EBITDA = (net patient revenue - total operating expenses) + depreciation and amortization.
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