Expenses up for physicians’ offices, hospitals in March

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Expenses rose for physicians’ practices and hospitals in the opening months of 2023.

Meanwhile, hospitals in March posted a median operating margin of 0.4%, the first time that metric has been positive since December 2021.

The figures were part of the monthly Performance Trends-Healthcare report analyzing March and the first quarter of the year by Syntellis Performance Solutions. March was the 11th consecutive month with year-over-year increases in total expenses and total nonlabor expenses, according to the Chicago-based market analytical firm.

“Hospitals continue to endure intense financial and operational pressures, yet a deep dive into clinical data from hospitals nationwide suggests they remain unwavering in their commitment to provide consistent levels of patient care,” Steve Wasson, Syntellis executive vice president and general manager for data and intelligence solutions, said in a statement. “Despite shrinking reimbursements and relentless expense increases, healthcare organizations are finding ways to grow in-demand services and better manage high costs to ensure they do not compromise vital care for the communities they serve.”

In doctors’ offices

For physicians’ practices, the first quarter of 2023 saw increases in four of five key performance indicators (KPIs) compared to the same time in 2022:

• Investment: 6.8%
• Total direct expenses: 14.2%
• Productivity: 10.6%
• Revenue: 15.7%

Support staff levels dipped 4.1% in the first quarter of 2023 compared to the first quarter last year.

Physician practices needed more investment support in the first quarter of 2023. Investment per physician full time equivalent (FTE) was $279,923, up 4.9% from $266,952 in the fourth quarter last year and up 6.8% from $262,163 in the first quarter of 2022.

“Per-physician expenses remain high” in the first quarter this year, following a trend of rising each quarter for more than two years, the report said. Total direct expense per physician FTE was $973,420, up 14.2% from $852,132 in the first quarter of 2022 and up 5.9% from $918,957 in the fourth quarter of 2022. Those expenses were up for practices across all regions and specialties.

Net revenues were up for all specialties, as measured by per physician FTE. In the first quarter this year, the net revenue per physician FTE reached $668,775, up 15.7% from $578,161 in the first quarter of 2022 and up 6.8% from $626,257 in the fourth quarter of 2022

Productivity also increased for the first three months of 2023. Physician work relative value units (wRVUs) were 6,150.79 for the quarter, up 10.6% from 5,563.23 in the first quarter of 2022 and up 6% from 5,801.25 in the last quarter of last year.

Gains in productivity were likely due to patient demand or having fewer support staff so far this year. Staffing levels dropped nationwide in the first quarter of 2023, according to Syntellis. Support staff FTEs per 10,000 wRVUs were 3.09, declining 4.1% from 3.22 in the first quarter of 2022 and down 4.4% from the last quarter of 2022.

At the hospital

The report noted total hospital expenses rose 4.7% in March compared to the same month in 2022. Nonlabor expenses increased 5.5% year to year due to higher costs for drugs, supplies, and purchased services, according to Syntellis.

Labor costs are high, but growing costs for staff slowed in the first quarter. March posted a 1.8% increase in total labor expenses, following increases of less than 1% in January and February.

Syntellis noted “another source of hospital operating pressures is the widening gap between how much hospitals bill for their services and what insurance companies and other health care payers agree to pay, referred to as the ‘allowed’ amount.”

“In summary, providers are being paid a smaller share of what they bill while expenses continue to climb,” the report said.

Syntellis draws its data from its Axiom Comparative Analytics program with figures from more than 135,000 physicians in more than 10,000 practices, and from more than 500 unique departments across more than 1,300 hospitals.