Hospitals, Physician Groups See Gains in March with Rising Volumes and Revenues

CHICAGO May 2, 2022 – After a rocky start to 2022, many U.S. hospitals, health systems, and physician groups saw early evidence that performance may be stabilizing as outpatient volumes and revenues improved in March, according to new issues of Kaufman Hall’s National Hospital Flash Report and Physician Flash Report. The results provide some hope for healthcare providers following the devastating surge of the Omicron COVID-19 variant last winter.

The reports also highlight ongoing challenges for providers, including mounting inflation, national labor shortages, and global supply chain issues. For hospitals and health systems, actual operating margins were negative for a third consecutive month. The median Kaufman Hall year-to-date Operating Margin Index was -2.43% in March, though the median change in Operating Margin rose 32.7% from February to March.

Hospitals experienced a resurgence in outpatient care and revenues in March, as many patients sought care they delayed during the Omicron surge,” said Erik Swanson, a senior vice president of Data and Analytics with Kaufman Hall. “Declining COVID-19 case rates also meant hospitals had fewer high-acuity patients. While the road to recovery remains long for many hospitals, these trends indicate some pressures of the pandemic may be lifting.”

Outpatient volumes improved and the pace of inpatient volume increases slowed. Adjusted Patient Days were up 12.5% month-over-month and 4.2% year-over-year, while Adjusted Discharges rose 18% month-over-month. Average Length of Stay was down 6.2% from February, as fewer patients required longer hospital stays.

Operating Room Minutes rose 17.3% month-over-month, as surgery patients continued to return after the Omicron surge delayed many nonurgent procedures. Higher volumes contributed to higher revenues in March. Month-over-month, Gross Operating Revenue rose 14% and Outpatient Revenue rose 16.1%. Adjusted expenses remained up compared to prior years, but decreased month-over-month as volume growth outpaced expense growth in March.

For physicians, signs of improvement included increased physician productivity, compensation, and revenues in the first quarter as practices saw higher patient volumes compared to the last quarter of 2021. Volume increases also contributed to ongoing expense hikes and higher investments/subsidies needed to support physician practices.

For the first time in two years, the median Investment/Subsidy per Physician Full-Time Equivalent surpassed levels seen during the start of the pandemic. The metric was up 1.5% compared to Q1 2020 at $288,227 in Q1 2022.

Physician productivity rose across all measures, with Physician work Relative Value Units (wRVUs) per FTE up 7.4% quarter-over-quarter, 15.4% year-over-year, and 20.2% compared to Q1 2020. The increased productivity helped to push physician compensation to its highest level in two years. Physician revenues also rose with higher patient volumes and increased productivity. Expenses continued to grow due to higher volumes, inflation, and a competitive labor market. Total Direct Expense per Physician FTE (including APPs) rose to $946,602 for the quarter, up 12.9% from the first quarter of 2020.

“Physician subsidies and expenses both reached two-year highs in the first quarter, and both metrics appear to be on an upward trajectory for the foreseeable future,” said Matthew Bates, Managing Director and Physician Enterprise Service Line lead with Kaufman Hall. “At the same time, per-physician productivity and revenues had sizable increases. Physician leaders must continue to closely monitor these trends and identify opportunities for improvement to manage the cost curve going forward.”

The National Hospital Flash Report draws on data from more than 900 hospitals, and the Physician Flash Report draws on data from nearly 100,000 providers representing more than 100 specialties. Data from both reports come from Syntellis Performance Solutions.

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