Healthcare Costs Continue to Surge, While Hospital Volumes Decrease

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According to two recent reports from healthcare consulting organization Kaufman Hall, healthcare costs are continuing to rise across the board as hospitals and physician organizations struggle with pandemic-related financial implications.

According to the firm’s National Hospital Flash Report for September 2021, overall expense per adjusted discharge was up 2.6 percent year-to-date and 12.9 percent year-over-year for hospitals. According to the report, which analyzed data from over 900 hospitals, labor costs climbed across the board despite monthly decreases in inpatient volumes and the number of hospital staff per patient bed.

Global supply chain disruptions affected both hospital and physician costs. Due to supply chain disruptions, non-labor hospital expenses increased 10.3 percent year over year and 8.8 percent year to date. Specifically, hospital drug costs increased by 43.9 percent year over year and 23.5 percent year to date.

Meanwhile, according to Kaufman Hall’s Physician Flash Report, physician expenses increased in the third quarter of 2021. The company discovered that expenses surpassed $900,000 due to supply chain disruptions and greater revenue cycle costs, based on data from more than 100,000 providers across specialties.

Expenses for physicians increased in all of the specialty cohorts studied in the report. In the third quarter, the average total direct expense per physician full-time equivalent (FTE) climbed to $914,045. This expense is up 4.4 percent from the second quarter, 13.2 percent from the third quarter of 2020, and 10.8 percent from the third quarter of 2019, before the COVID-19 pandemic hit.

While rising expenditures affect both hospitals and physician groups, physician groups appear to be performing better in terms of overall financial improvement.

In the third quarter, net revenue per physician FTE climbed to $660,762, up 4.4 percent from the second quarter ($632,691) and up 11.4 percent from the same quarter last year.

Furthermore, from $103.46 in the third quarter of 2020 to $105.97 in the third quarter of 2021, net revenue per physician work relative value unit (wRVU) increased by 2.4 percent. Overall, physician wRVUs increased by 0.1 percent from the second to third quarters of 2021, and by 9.4 percent compared to the same period last year.

On the other hand, hospitals saw patient numbers drop once more in September as COVID-19 cases fell. As a result, the median change in operating margin from August to September was 18.2 percent, down 1.7 percent from pre-pandemic levels.

The hospitals operating in areas recently struck by the Delta variant’s surge, according to Kaufman Hall, were the ones that suffered the most. This incorporates hospitals in the West, South, and Northeast/Mid-Atlantic, all of which had their margins shrink year over year.