Outpatient Volumes Led to Better Physician, Hospital Revenues in March

Following a rocky financial start to 2022, hospitals saw some early signs of relief in March, with higher revenues and outpatient volumes plus lower expenses, according to Kaufman Hall’s National Hospital Flash Report.

The report includes actual and budget data from more than 900 hospitals. The recent data reflects hospital performance during March 2022.

COVID-19 cases and hospitalizations declined significantly throughout the month, allowing hospitals to see slight financial recovery.

“Hospitals experienced a resurgence in outpatient care and revenues in March, as many patients sought care they delayed during the Omicron surge,” Erik Swanson, senior vice president of Data and Analytics with Kaufman Hall, said in a press release. “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, leading to a 16.1 percent increase in outpatient revenue compared to February and a 34.9 percent boost compared to March 2020. The rise in inpatient volumes was slower but still contributed to a 5.4 percent month-over-month increase in inpatient revenue.

Patient days and adjusted patient days were up from February by 4.3 percent and 12.5 percent, respectively. Adjusted discharges also rose 18 percent between February and March.

In addition, surgery volumes increased, perhaps due to patients returning for nonurgent procedures after the Omicron surge caused delays. Operating room minutes (17.3 percent) and emergency department visits (16.8 percent) were also up in March.

The average length of stay (LOS) declined by 6.2 percent due to fewer high acuity patients requiring extended hospital stays, the report noted. However, average LOS was still high compared to last year and March 2020.

Rising patient volumes meant higher revenues in March. Gross operating revenue increased 14 percent from February, 6.6 percent since March 2021, and 35.1 percent from March 2020.

Hospitals also saw some relief in expenses last month. Total expense per adjusted discharge and non-labor expense per adjusted discharge both decreased 9 percent, while labor expense per adjusted discharge fell 8.3 percent.

However, total expenses and labor expenses were up by more than 10 percent compared to March 2021, the report noted.

Despite the recovering revenue figures, hospital margins remained negative in March for the third consecutive month. In March, the median Kaufman Hall Operating Margin Index was -2.43 percent but improved month-over-month, up from -3.99 percent in February.

The median change in operating margin increased by 32.7 percent from February to March and was up 85.6 percent compared to the start of the pandemic. However, the median change in operating margin was down 48.7 percent compared to March 2021.

Similarly, the median change in operating earnings before interest, taxes, depreciation, and amortization (EBITDA) margin increased 26.7 percent from February and 98.1 percent from March 2020. However, it declined 37.8 percent from March 2021.

Physician practices also saw positive financial gains during the first quarter of 2022, according to Kaufman Hall’s Physician Flash Report. The report reflected data from more than 100,000 employed physicians.

Median physician compensation per full-time equivalent (FTE) rose by 3.6 percent from the last quarter of 2021, driven by increased productivity. However, this increased productivity also led to a 5.8 percent quarter-over-quarter decline in physician compensation per work relative value unit (wRVU).

Like hospitals, higher patient volumes led to higher revenues for physicians. Net patient revenue per physician FTE rose 1 percent from Q4 2021 and was up by 9.6 percent year-over-year. But the 7.4 percent increase in productivity also led to a 6.5 percent decrease in net patient revenue per physician wRVU.

“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,” Matthew Bates, managing director and physician enterprise service line lead with Kaufman Hall, stated in the press release.

“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.”