Hospitals, Physician Practices Saw High Expenses, Revenues in June

Hospitals, health systems, and physician practices saw rising revenues and patient volumes in June 2022, but it was not enough to offset the continuously high expenses, leading to negative margins for the sixth consecutive month, according to data from Kaufman Hall.

Kaufman Hall’s National Hospital Flash Report includes actual and budget data from more than 900 hospitals. The recent data reflects hospital performance during June 2022. The Physician Flash Report is based on data from more than 200,000 physicians and advanced practice providers from 100 specialties. The latest version reflects data from the second quarter of 2022.

Hospital operating margins were up from May 2022 but remained negative. The median change in operating margin increased by 30.8 percent from May to June but was down 49.3 percent from June 2021. Similarly, the median change in operating EBITDA margin was up 23.5 percent from May but down 35.0 percent from June 2021.

The median operating margin through June was -0.09 percent, compared to -0.33 percent in May.

“To say that 2022 has challenged healthcare providers is an understatement,” Erik Swanson, senior vice president of data and analytics at Kaufman Hall, said in the press release. “It’s unlikely that hospitals and health systems can undo the damage caused by the COVID waves of earlier this year, especially with material and labor costs at record highs this summer.”

Outpatient volumes also rose in June, the report found. Operating room minutes increased 2.4 percent between May and June but were down 4.8 percent compared to June 2021. Length of stay (LOS) fell 2.1 percent month-over-month but increased 2.8 percent year-over-year (YOY).

Patient days declined 2.6 percent from May to June but were up 0.5 percent from last year. Adjusted discharges rose 1.8 percent from May, while emergency department visits fell 2.6 percent.

Hospitals and health systems saw a slight increase in revenues during June.

Gross operating revenue was up 1.2 percent from May, 4.1 percent from June 2021, and 6.2 percent year-to-date (YTD). Outpatient revenue also increased 2.6 percent from May to June and was up 4.7 percent from June 2021 and 7.8 percent YTD. Inpatient revenue fell 0.9 percent from May but was up 2.2 percent YOY and 4.6 percent YTD.

Total expenses dropped 1.3 percent in June but remain high compared to last year. Total expenses were up 7.5 percent from June 2021 and have increased by 9.5 percent YTD due to inflation and labor shortages, the report noted.

Labor expense per adjusted discharge was down 6.7 percent from May but up 13.4 percent YTD. Total expense per adjusted discharge declined 3.6 percent month-over-month.

Full-time employees per adjusted occupied bed decreased 4.8 percent from May to June, indicating that efficiency increased in the past month.

Physician practices experienced similar financial trajectories in the second quarter of 2022.

The median investment/subsidy per full-time provider decreased from Q1 to Q2 but was higher than last year. Surgical specialty investment saw the highest decrease, falling from $417,276 in Q1 to $364,089 in Q2.

Like hospitals, physician practices saw higher patient volumes and revenue increases in Q2 of 2022. Revenue per provider full-time equivalent (FTE) rose 5.6 percent but was only up 1 percent YOY.

The net patient revenue per provider work relative unit (wRVU) improved from Q1 to Q2 but was lower than in 2021. Provider productivity, measured by provider wRVUs per FTE, increased 4 percent, with primary care and surgical specialties seeing the largest increases.

Compensation per FTE provider fell from $288,491 in Q1 to $279,985 in Q2. Compensation per physician FTE also declined in Q2.

Expenses escalated for physician practices as well. Total direct expense per provider FTE rose 2.2 percent and reached a new high of $619,682 in Q2. Expenses were also up 7 percent YOY.

Staffing shortages are also still impacting physician organizations, with support staff FTEs per 10,000 wRVUs down 4.8 percent from Q1.

“Given the trends in the data, physician practices need to focus on efficiency in the second half of 2022,” Matthew Bates, managing director and physician enterprise service line lead with Kaufman Hall, said in the press release. “Amid historically high expenses, shifting some services away from physicians to advanced practice providers like nurse practitioners or physician assistants could help rein in the costs of treating an increased patient load while taking some of the weight off of the shoulders of physicians.”