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Hospitals And Physicians See Rebound In Revenue But Expense Challenges Remain

Analysis  |  By Amanda Schiavo  
   May 09, 2022

The challenges of the omicron variant have started to wane, yet many hospitals and physicians' groups are still struggling with expenses related to COVID-19.

Hospitals and health systems were facing an uphill battle at the start of 2022 as they struggled to meet the challenges brought on by the surging omicron variant; however, new data shows these organizations are starting to see relief thanks to the rebound in outpatient volumes and revenues.

While the actual operating margins for hospitals and health systems were negative for a third consecutive month, according to Kaufman Hall's National Hospital Flash Report and Physician Flash Report, gross operating revenue climbed by 14% from February to March. The total expense per adjusted discharge declined by 9% and adjusted discharges grew by 18% month-over-month. Overall, the average length of patient stays dropped by 6.2% from February, as there were fewer patients in need of long hospital stays.

"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 an email 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."

On the physicians' side of things, doctors saw an increase in productivity, compensation, and revenues during the first quarter of the year due to a rise in patient volumes, according to the reports. For example, physician wRVUs per FTE increased by 15%, and physician compensation climbed to 7% to $349,072. But physicians are still dealing with heavy patient expenses because of those increased volumes. Total direct expense per physician FTE rose by 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," Matthew Bates, managing director and physician enterprise service line lead with Kaufman Hall, said in an email 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."

Amanda Schiavo is the Finance Editor for HealthLeaders.

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