Standalone hospitals have experienced financial boosts from investment income in recent years amid a stronger economy, according to an analysis by Juniper Advisory, an investment banking firm.
For the analysis, researchers examined the most recent audits available between 2016 and 2017 for 90 independent hospitals in California, Florida, Illinois, Indiana, Iowa, Minnesota, Ohio, Texas and Wisconsin.
Four findings:
1. Most hospitals (61 percent) saw operating margins below 3 percent.
2. Hospitals' average operating margin was minus 0.8 percent, and average net income margin was 3.7 percent.
3. Average net margin decreased 21 percent due to operating performance, meaning hospitals in the analysis on average lost money on operations.
4. Average investment income revenue accounted for 47 percent of the hospitals' net margin.
While investment income has boosted standalone hospitals' balance sheets recently, they could see the opposite effect in a weaker economy, said David Gordon, principal with Juniper Advisory.
"Like any business, hospitals should not consistently rely on investment income to support their day-to-day operations," he said. "We've been watching the ongoing economic growth, which is good for both hospitals and their patients, but the economy will not always be as strong as it has been the last few years. When that time comes, hospitals will have to demonstrate that they can provide care much more cost-efficiently."
Read more about the analysis here.
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