Thomson Reuters: Hospitals seeing financial recovery

Recessionary pressures on U.S. hospitals are finally beginning to ease, according to a report issued by Thomson Reuters.

The firm reported that the profit margin of U.S. hospitals was 3.1 percent in the third quarter of 2009, up from 0.17 percent in the third quarter of 2008. The increase in profit margin applied to all classes of hospitals, including small, medium and large community hospitals, as well as teaching hospitals and major academic medical centers. Hospitals also appeared to be keeping operating expenses down—they were able to keep expense growth close to 0 percent in the first quarter of 2009, mostly by closely managing labor expenses.

Total hospital margins improved in the first quarter, with about 30 percent of hospitals operating in the red--a big improvement over the 50 percent reported in the third quarter.

There are still some signs that hospitals are enduring some financial pressures. Thomson Reuters said hospitals’ average cash reserves on hand were close to 90 days in the first quarter, continuing the rate of decline seen over the last two years.

"The financial situation has improved dramatically for U.S. hospitals," said lead author Gary Pickens, chief research officer for the healthcare & science business of Thomson Reuters. "When we published our first analysis of hospital economic health in the fall of 2008, hospitals were facing unprecedented economic stress and staring down a real crisis. Through a combination of aggressive cost controls and overall improvement in the economy, we're beginning to see a recovery, but it will be critical to watch these metrics to make sure that recovery is sustainable."