Operating margins same, with overall increase
Despite the challenge of softer patient volume, not-for-profit hospitals and health systems maintained their operating margins and improved their overall margins in fiscal 2010, according to median financial figures released last week by Standard & Poor’s.
Median net margins for standalone hospitals and healthcare systems rose to 4% last year from 2.4%. That bodes well for the short term, but S&P officials expect revenue growth to continue to slow.
“Providers are going to have a harder and harder time offsetting what is an increasingly hostile environment,” said Martin Arrick, a managing director in S&P’s Public Finance Ratings Group.
Operational margins remained at 2.3%, almost identical to fiscal 2009. That trend will also continue for the next couple of years, Arrick added. “Margins will be squeezed, and I think providers will work very hard to maintain the margins they have and the rate of decline for the best systems will either be not at all or very slow,” he said. “But for those having a harder time, it will accelerate.”
The earnings before interest, depreciation and amortization numbers also stood out at every level. While not reaching the heights of fiscal 2000, the EBIDA figures saw a sharp rise from last year, S&P analyst Jessica Goldman pointed out. S&P credited better nonoperating income and stable operating earnings for the increase. That repeats a