Study shows evidence that volume and revenue may be rebounding
Although 2022 started off poorly for most physicians and hospitals, a pair of studies shows that both are starting to see improving economics conditions. Kaufman Hall’s National Hospital Flash Report and Physician Flash Reportshow that outpatient volumes and revenue improved in March and may be stabilizing as the effects of the pandemic wane.
There are still challenges for physicians though, including increasing inflation, labor shortages, and supply chain issues.
The signs of improvement included increased physician productivity, compensation, and revenue 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 revenue 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, in a statement. “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.”
Hospitals and health systems still faced a third consecutive month of negative operating margins, with the median Operating Margin Index being -2.43% in March. That was an increase of 32.7% from February.
“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, in a statement. “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.