Hospitals See a Second Month of Expense Declines vs. 2021 Highs

This report highlights the latest trends in financial performance for U.S. hospitals and physician groups, drawn from monthly data from more than 135,000 physicians and over 1,300 hospitals. 

Hospitals and physician groups nationwide continued to see depressed performance in October 2022 despite gains in some core metrics. Key trends include:  

  • Hospital expenses per adjusted volumes declined for a second month signaling potential easing of long-running expense pressures
  • Hospital operating margins dropped for the tenth consecutive month as revenue declines eclipsed the shift in expenses 
  • Outpatient revenues continued to climb reflecting increased demand for outpatient services
  • Physician expenses remained high contributing to a slight increase in physician investments despite revenue and productivity gains


Hospital KPI Data for October


Monthly analysis examines fluctuations in average hospital expense metrics nationwide.

Median hospital expenses per adjusted volumes declined year-over-year (YOY) for a second consecutive month in October, suggesting potential easing of expense pressures following eight straight months of YOY increases. 

The declines were smaller than in September. For example, Total Expense per Adjusted Discharge was down -1.4% YOY compared to -5.6% YOY the month before. For October, Labor Expense and Non-Labor Expense per Adjusted Discharge decreased -1.7% YOY and -0.7% YOY, respectively. Only Purchased Service Expense per Adjusted Discharge increased at just 0.9% YOY.

Month-over-month, however, adjusted expenses continued to rise with Total Expense per Adjusted Discharge up 3% and Labor Expense per Adjusted Discharge up 4.5%.


operating margin graph November

Hospital Operating Margin Benchmarks 

These latest benchmarks illustrate the interplay of revenues and expenses on historically tight hospital operating margins

The expense improvements were not enough to prevent a tenth consecutive month of hospital operating margin declines. The median change in Operating Margin dropped -2.0 percentage points YOY and -0.5 percentage point month-over-month. The median change in Operating Earnings Before Interest, Taxes, Depreciation, and Amortization (EBITDA) Margin decreased -1.9 percentage points YOY and -0.5 percentage points versus September.

Hospital Volume and Revenue Benchmarks 

Monthly hospital volume and revenue metrics reveal underlying trends in patient demand

Once again, per-patient revenue declines contributed to October’s margin declines. Net Patient Service Revenue (NPSR) per Adjusted Discharge decreased -3.9% YOY, outpacing improvements in Total Expense per Adjusted Discharge for a second month. 

Total revenue metrics were mixed. Inpatient Revenue declined -3.1% YOY while Outpatient Revenue jumped 9.9% YOY, indicating continued growth in demand for outpatient services.

Patient volumes improved across most metrics YOY. Adjusted Discharges rose 3.7%, Adjusted Patient Days increased 1.3%, ED Visits were up 7.4%, and Operating Room Minutes rose 3.4%. Average Length of Stay (LOS) decreased -2.7%, likely due to lower patient severity.


Physician investments KPI graph November

Physician Practice Benchmarks 

A look at last month’s key performance indicators from more than 10,000 physician practices

Physician practices nationwide felt the weight of ongoing expense increases in October. The annualized Total Direct Expense per Physician Full-Time Equivalent (FTE) jumped to $942,364, up 12.2% compared to 2021 levels and 18.6% from 2020. 

The level of investment needed to support physician practices rose slightly as a result, with the annualized October Investment per Physician FTE up 0.7% versus 2021 levels at $237,467. Compared to the first year of the COVID-19 pandemic in 2020, the metric was down -7.6%.

The YOY rise in per-physician investment came despite an 11.4% YOY increase in Net Revenue per Physician FTE and a 9.5% YOY increase in physician productivity, measured as Physician work Relative Value Units (wRVUs) per FTE.

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