Rising labor expenses and shrinking reimbursements are putting significant pressure on hospitals’ financial health, according to Kaufman Hall's National Hospital Flash Report.
Here are five things to know from the report, based on data from 1,300 physicians:
1. Labor expenses per calendar day increased by 5% year-over-year in September. This sustained rise highlights ongoing challenges in controlling workforce-related costs.
2. Medical groups face mounting labor costs, with 84% of total expenses attributed to staffing, according to Kaufman Hall's Physician Flash Report. Notably, the average subsidy per employed physician surpassed $300,000 for the first time, reaching $304,312.
"Investment/subsidy per physician rose above $300,000 for the first time — a sign that current models of physician employment are not sustainable," said Matthew Bates, managing director and Physician Enterprise service line leader with Kaufman Hall. "Revenue is increasing but physicians and providers are working more while generating less revenue. Health systems need to rethink operations to align the costs of provider employment with the current healthcare environment."
3. The breakdown of labor expense per calendar day change year over year by region is:
- West: 7% increase
- Midwest: 4% increase
- South: 6% increase
- Northeast / Mid-Atlantic: 5% increase
- Great Plains: 4% increase
4. Compensation per full-time employee (FTE) rose 3% in the third quarter. Physicians earned an average of $369,392 per FTE, while providers earned $305,533.
5. Despite rising costs, hospital finances showed relative stability. However, average margins dipped slightly from 4.7% to 4.3%, following four months of steady performance.