Hospital Revenue Growth Outpaced Rising Expenses in March
Total expenses increased by 8.3 percent from February to March 2023, but gross operating revenue grew by 12.5 percent over the same time.
Source: Getty Images
- Revenue growth exceeded expense increases in March 2023, resulting in positive hospital operating margins for the first time in 15 months, according to a report from Syntellis Performance Solutions.
The report reflects data from more than 135,000 physicians from over 10,000 practices and more than 500 departments across over 1,300 hospitals.
The median year-to-date operating margin for hospitals was 0.4 percent in March, up from -1.1 percent in February. This marks the first time hospital margins have been positive since December 2021.
The median operating margin was up 1.4 percentage points compared to March 2022, while the median change in operating earnings before interest, taxes, depreciation, and amortization (EBITDA) margin increased 1.3 percentage points year-over-year.
Total expenses and total non-labor expenses saw an 11th consecutive month of year-over-year increases, rising 4.7 percent and 5.5 percent, respectively. Total labor expenses rose 1.8 percent year-over-year, while drug expenses grew 7.6 percent.
From February to March, total expenses increased by 8.3 percent, total non-labor expenses grew by 6.5 percent, and total labor expenses rose by 9.6 percent.
Hospital volumes also increased, with adjusted discharges growing 13.5 percent from February and adjusted patient days rising 11.2 percent. Emergency department visits were up 8.3 percent year-over-year and 12.1 percent month-over-month. The average length of stay fell 2.9 percent from last year, suggesting hospitals saw lower acuity patients in 2023.
Hospital revenue growth outpaced rising expenses, the report found. Outpatient services saw the most significant revenue increases of 9.5 percent year-over-year and 14 percent month-over-month. Outpatient revenue as a share of overall revenue also grew by 1.5 percent from March 2022 and 2.1 percent from February.
Gross operating revenue was up 8.9 percent from March 2022 and 12.5 percent from February, while inpatient revenue rose 5.5 percent from last year and 9.9 percent from last month.
While hospitals experienced positive revenue growth in March, they faced reimbursement woes.
Imaging procedures and gross revenues per procedure increased, and providers increased how much they billed for these procedures. Billed amounts for common imaging procedures grew at a rate of 1.5 to 2 times compared to allowed amounts, which is the amount insurance companies agree to pay.
Allowed payments as a percentage of billed amounts have decreased in the past few years. The allowed amount as a percent of billed for MRIs fell by 1.7 percent annually and 5 percent between 2019 and 2022. This metric declined by 1.2 percent annually for both radiology and CT procedures, and dropped 3.6 percent and 3.5 percent over three years, respectively.
“These trends show that healthcare providers are being paid a smaller share of what they bill while expenses continue to climb,” the report stated. “As providers bill more in hopes of getting higher reimbursements, payers are decreasing the level of those reimbursements.”
The report also offered insight into physician practices’ financial performances in March. The median investment per physician full-time equivalent (FTE) increased to $279,923 in the first quarter of 2023, up 4.9 percent from the last quarter of 2022. Per-physician expenses rose 14.2 percent to $973,420 in Q1 2023 compared to Q1 2022.
While staffing levels declined in Q1 2023, the median net revenue per physician FTE was up 15.7 percent from Q1 2022 at $668,775.
