Market Analysis and Monthly Hospital & Physician KPIs: July 2022

Executive Summary

Expenses Hinder Healthcare Providers’ Progress in First Half of 2022

The first half of 2022 was challenging for the nation’s hospitals, health systems, physician practices, and other healthcare providers as they faced steep inflation, supply chain challenges, severe labor shortages, and the largest surge in COVID-19 cases since the start of the pandemic.

Rising expenses continued to squeeze hospital margins, with June marking a sixth consecutive month of year-over-year (YOY) Operating Margin declines. The median change in Operating Margin was down -49.2% YOY for the month and -47% for the first six months of 2022 versus the same period last year. Total Expense per Adjusted Discharge was up 9.7% year-to-date (YTD), driven largely by a 15% YTD increase in labor expenses.

“Health systems continue to face significant challenges balancing patient access to care and rising costs with the recognition that they can no longer afford to be all things to all patients,” said Leslie Grimmer, Managing Director with Huron’s Healthcare Industry Business — a Syntellis partner. “Now more than ever, healthcare organizations are considering how to evolve their assets, service lines, and clinical operations to drive alignment and improved financial health. Incrementally focusing on a single lever cannot adequately address the issue and high-performing systems are instead designing for affordability. This work integrates operational expense reduction, revenue strategy, and new system design with economic and behavioral factors needed for transformational growth.”

Physician practices also endured continued expense pressures, with Total Direct Expense per Physician Full-Time Equivalent (FTE) rising 10.5% from Q2 2021 to Q2 2022. The median investment needed to support physician practices rose as a result, up 16.2% over the same period to $285,173 for Q2.

There are some potential signs of relief, however. Adjusted hospital expenses softened somewhat from May to June, enabling a 10.5% month-over-month Operating Margin increase. While margin pressures remained tight in most hospital departments, Cath Labs saw median YOY revenue growth surpass expense growth for the first time in 2022. A comparison analysis showed that the ability to better control costly labor and medical supply expenses was the key differentiator for high-performing Cath Labs compared to their low-performing peers.

Key results from our latest data include:

• Hospital Operating Margins decreased -47% year-to-date
• Median Physician Investment rose +16.2% from Q2 2021 to Q2 2022 
• Per-unit ED Expense vs. Revenue gap was +13.7 percentage points 
• Per-unit Cath Lab Revenue vs. Expense gap was +1.1 percentage points 
• Labor Expense for low- vs. high-performing Cath Labs was +49.7%
   

Steve Wasson

EVP and GM, Data and Intelligence Solutions
Syntellis Performance Solutions

 

 

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Market Analysis

July 2022

Key June market analysis year-over-year metrics include:

• Change in Cath Lab Revenue per Unit of Service +9.1%
• Change in Cath Lab Expense per Unit of Service +8.0%
• Change in ED Expense per Unit of Service +15.5%
• Change in ED Revenue per Unit of Service +1.8%
   

Most Departments See Disproportionate Expense Growth

Expense growth continued to outpace revenue growth across most core hospital departments in June. The gap was particularly wide for Emergency Departments (EDs), with the year-over-year (YOY) change in Expense per Visit climbing to 15.5% in June compared to a 1.8% growth in Revenue per Visit over the same period. The 13.7 percentage-point difference reflects extreme expense pressures experienced in EDs due to high fixed operational costs.

One exception to the trend this month was Cath Labs, which saw revenue growth outpace expense growth by 1.1 percentage points for the first time in months. Revenue per Procedure grew 9.1% YOY in June for Cath Labs compared to an 8.0% YOY increase in Expense per Procedure.
 

Expense Results Differ for EDs, Cath Labs

Analysis of specific expense areas clearly shows that labor expenses continue to be the key pain point for the nation’s EDs. Labor Expense per Visit jumped 19.8% YOY in June, driving Total Expense per Visit up 15.5% YOY for the month despite a -1.0% decrease in Non-Labor Expense per Visit over the same period.

Cath Labs saw YOY increases across all expense categories in June. Labor Expense per Procedure had the biggest increase at 12.2% from June 2021 to June 2022, followed by Non-Labor Expense per Procedure at 7.2%.
 

Comparing High vs. Low Performing Cath Labs

To further understand Cath Labs’ performance metrics, Syntellis analyzed low versus high performers for June. Low performers are defined as organizations performing between the 20th and 40th percentiles on Gross Operating Margin (gross revenues minus expenses), and high performers are those between the 60th and 80th percentiles.

Gross Patient Revenue per Procedure was 69.8% higher at $21,852 for high-performing Cath Labs versus $12,873 for low-performing departments. Not surprisingly, the opposite was true for most expense categories. Labor Expense per Procedure was 49.7% higher at $489 for low performers versus $327 for high performers. Medical Supply Expense per Procedure also was higher (35.4%) as was Purchased Service Expense per Procedure (46.9%) for low performers compared to their high-performing peers.

Healthcare leaders drive performance improvement at their organizations by monitoring changes versus internal and external benchmarks, identifying opportunities for improvement, and using the data to support accountability.

Having robust data and analytics is essential. To illustrate their importance in driving strong results, this chart shows volume, revenue, and expense performance for a sample high-performing Cath Lab. Using December 2021 performance as the baseline, the department saw Procedures climb significantly from a low of 7% in February to a high of 63% in May. In June, Procedures were up 56% versus December 2021.

The rise in procedures drove declines in labor and medical supply expenses as the organization was able to control costs amid higher volumes and maintained high-performing margins despite a decrease in revenue per procedure. Net Patient Service Revenue (NPSR) per Procedure declined from -9% below the baseline in February to -30% below the baseline in June.

Want monthly insights proven to help manage performance and contain costs? Request a demo of Syntellis’ data and intelligence solutions.

 

Hospital KPIs

July 2022

The top five financial KPIs for U.S. hospitals and health systems for the first half of 2022 versus the same period last year are:

• Operating Margin (without CARES): -47.0%
• Labor Expense per Adjusted Discharge: +15.0%
• Total Expense per Adjusted Discharge: +9.7%
• Adjusted Discharges: -0.8%
• Gross Operating Revenue: +6.5%
   

Operating Margins Remain Down

The median change in hospital margins continued to decrease in June, marking a sixth consecutive month of year-over-year (YOY) declines. The median change in Operating Margin was down -49.2% YOY for the month, not including federal Coronavirus Aid, Relief, and Economic Security (CARES) funding.i Year-to-date (YTD) versus the first six months of 2021, the metric was down -47%.

Even so, margins had gains month-over-month as U.S. hospitals and health systems had some expense easing with adjusted expenses declining from May to June. The median change in Operating Margin was up 10.5% month-over-month.

The median change in Operating Earnings Before Interest, Taxes, Depreciation, and Amortization (EBITDA) Margin (less CARES) was down -34.2% YOY and -33% YTD, but up 6% month-over-month. The metric declined YOY for hospitals across all regions, with those in the West having the greatest median decline at -44%.
 

Expenses Rise, but Ease from Prior Month

Expense pressures persisted for the nation’s hospitals in June, with labor expenses continuing to show the biggest increases. Labor Expense per Adjusted Discharge rose 11.2% YOY and 15% YTD. Rising wages in a tight labor market remain the primary contributing factor, as evidenced by staffing levels — measured as FTEs per Adjusted Occupied Bed (AOB) — being essentially flat at -0.1% YOY.

Total Expense per Adjusted Discharge rose 6.4% YOY and 9.7% YTD. Hospitals across all regions saw YOY increases in both Total and Labor Expense per Adjusted Discharge. Hospitals in the West had the biggest increases, with total expense up 17.9% and labor expense up 21.7%.

Expense pressures showed some sign of easing, however, with month-over-month declines across most adjusted expense measures. Compared to May, Total Expense per Adjusted Discharge was down -3.7%, Labor Expense per Adjusted Discharge was down -5.8%, and Non-Labor Expense per Adjusted Discharge was down -0.8%.
 

Volumes Continue to Lag

Volumes saw moderate to poor performance across most metrics in June. Adjusted Discharges were flat YOY and decreased slightly YTD at -0.8%, while Adjusted Patient Days increased 2.4% YOY and 3.9% YTD.

Emergency Department (ED) Visits increased 2.6% YOY and 6.1% YTD, but Operating Room Minutes decreased -4.6% YOY and were essentially flat YTD at -0.5%.

Volume gains were more consistent compared to the first half of 2020, when many hospitals experienced steep declines in demand with the start of the COVID-19 pandemic. Adjusted Discharges rose 8.9%, Adjusted Patient Days increased 18.7%, ED Visits were up 11.8%, and Operating Room Minutes jumped 18.1% for the first half of 2022 versus the same period in 2020.
 

Revenue Increases Continue

Hospital revenues continued to see modest gains in June. Gross Operating Revenues rose 4.3% YOY and 6.5% YTD, driven in part by higher outpatient demand. Outpatient Revenue was up 4.7% YOY and 8.0% YTD, and Inpatient Revenue increased 2.7% YOY and 4.7% YTD.

Bad Debt and Charity as a Percent of Gross Revenue saw significant declines over the same period, dropping -8.1% YOY and -10.5% YTD.

NPSR per Adjusted Discharge also had minimal gains, rising just 1.8% YOY and 3.4% YTD. Looking at hospitals across different regions, NPSR per Adjusted Discharge rose YOY for hospitals in four of five regions. The Northeast/Mid-Atlantic had the biggest increase at 5.9% YOY and the South had the only decrease at -4.1% YOY.

 

Physician Practice KPIs 

July 2022

The top five physician financial and operational KPIs for Q2 2022 versus Q2 2021 were:

• Investment: +16.2% 
• Total Direct Expense: +10.5%
• Productivity: +11.4% 
• Revenue: +7.0%
• Support Staff Levels: -4.4% 
   

Physician Investments Remain High

Investments needed to support physician practices rose above 2021 levels again for the second quarter of 2022 but were down slightly from Q1 2022. The median Investment per Physician FTE was $285,173 in the second quarter, up 16.2% from $245,342 in Q2 2021. The metric decreased -2.4% from the first quarter of this year after consistent increases for at least the last three quarters.

Median Investment per Physician FTE rose from Q2 2021 to Q2 2022 for physician practices across all regions. Practices in the West had the biggest increase at 28.6%. All specialties also had increases in Investment per Physician FTE from Q2 2021 to Q2 2022. Obstetrics/Gynecology (Ob/Gyn) had the biggest jump over that period at 35.3%.
 

Physician Expenses Inch Up

Physician expenses continued to climb for practices nationwide. The median Total Direct Expense per Physician FTE (including advanced practice providers) was $950,024 for Q2 2022, up 1.5% from Q1 2022 and up 10.5% from Q2 2021.

Practices in four of five regions had expense increases from Q1 to Q2 2022. The Northeast/Mid-Atlantic had the biggest increase at 5.1%, and the West was the only region to see a decrease for this metric at -5.7% QOQ.

Among different specialties, two of five cohorts had increases in Total Direct Expense per Physician FTE from Q1 to Q2 2022. Primary Care had the biggest QOQ increase at 4.3% while Hospital-based Specialties had the biggest decrease at just -1.5%.
 

Physician Productivity Improves

Physician productivity rose for a third consecutive quarter in Q2 indicating rising patient demand. The median Physician work Relative Value Units (wRVUs) per FTE were 6,346.96 for the quarter, up 5.3% from Q1 2022 and up 11.4% from Q2 2021.

Four of five physician specialties had QOQ increases for the metric. Surgical Specialties and Ob/Gyn had the biggest increases at 9.5% and 14.6%, respectively. Primary Care had the biggest increase in median wRVUs per FTE versus Q2 2021 at 14.8%.
 

Physician Revenues See Ongoing Gains

The median Net Revenue per Physician FTE (including advanced practice providers) was $646,947 in Q2. The metric increased 3.3% from Q1 2022 and 7.0% from Q2 2021. Net Revenue per Physician FTE rose for practices across all regions from Q1 to Q2, ranging from a low of 0.4% in the South to a high of 10.2% in the Midwest.

Four of five physician specialties had QOQ increases in Net Revenue per Physician FTE. From Q1 to Q2 2022, Surgical Specialty practices had the biggest increase at 10.4% and Hospital-based Specialties had the only decrease at -8.9%.
 

Staffing Levels Down for a Second Quarter

Median Support Staff FTEs per 10,000 wRVUs decreased for a second consecutive quarter. At 2.96, the metric was down -4.2% from Q1 2022 and down -4.4% compared to 3.09 in Q2 2021.

Median Support Staff FTEs per 10,000 wRVUs declined across all specialties from Q1 to Q2 2022. Surgical Specialties had the biggest decrease at -6.0 and Primary Care had the least decrease at -0.8%. Surgical Specialties also had the biggest decrease in the metric from Q2 2021 to Q2 2022 at -9.2%.

 

The Road Ahead for Healthcare

Many of the challenges that plagued providers throughout the first half of 2022 are expected to continue in the second half of the year. Numerous forces — including ongoing inflation and widespread labor shortages — are contributing to persistent expense growth. Hospitals saw some relief with expense and margin declines from May to June, but whether those results were a temporary reprieve or early signs of a bigger trend remains unknown.

Having robust and reliable data and analytics is essential for healthcare leaders navigating current market fluctuations. As expense pressures mount, they must keep a close eye on costs organization-wide, monitor changes over time, and implement strategies to counter the impacts of high costs. 

A comprehensive enterprise performance management solution and deep data and analytics capabilities can help these crucial organizations identify the driving forces behind current difficulties, anticipate future challenges, and plan for a better future.

 

Source: Syntellis’ Axiom™ Comparative Analytics, which offers access to near real-time data drawn from more than 135,000 physicians from over 10,000 practices and 139 specialty categories, and from 500+ unique departments across more than 1,000 hospitals. Powered by Syntellis IQ, Comparative Analytics also provides data and comparisons specific to a single organization for visibility into how their market is evolving.