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Although patient volume is rising in healthcare systems, costs that outpace gains up to 3:1 continue to squeeze margins.

Hospitals have seen a rise in patient volume since 2022. However, according to a report from Syntellis Performance Solutions, hospital operating margins are nonetheless struggling due to the intricate web of financial complexities that hospitals and physicians must navigate. Based on the report, the median change in operating margin for the Northeast/Mid-Atlantic region was 1.7% year-over-year percentage points. For the South, the median change in operating margin was 5.9%. While overall expenses rose, supply and drug expenses saw meaningful increases. What’s more, year-over-year total non-labor expenses rose by 7.3%.

With outpatient care numbers climbing 12.3% from 2022 to 2023, according to the Syntellis report, physicians must find an effective way to adjust to the growing trend of patients foregoing more resource-intensive treatments instead of more accessible ones without increasing total expenses. Despite half a year’s worth of rising inpatient and outpatient revenues, ballooning overall expenses are pushing hospital operating margins to the brink, notes Steve Wasson, chief data and intelligence officer, Strat Decision Technology. According to a joint report from Syntellis and the American Hospital Association (AHA), health systems are stuck in a holding cell with decreasing cash reserves and increasing reimbursement delays and denials, leaving them financially hamstrung.

Increased patient volume leads to increases in productivity revenue; however, hospitals need to effectively manage the expenses that come with the benefit of having more patients. If hospitals do not figure out a solution, physicians and patients will share the burden of any consequences, as healthcare quality could suffer. According to the American Medical Group Association (AMGA) 2023 Medical Group Operations and Finance Survey, operational costs outpace revenue gains by almost 3 to 1. Median loss per physician for medical groups affiliated with a larger system has risen above $249,000, demonstrating the growing gap between revenue and expenses.

The AMGA report also noted that the total revenue per physician reached $719,901 in 2023, but overall expenses per physician skyrocketed by up to $1,036,238. As such, the report notes that the 9.1% increase in total revenue per physician since 2020 is coupled with a significant 26.5% increase in overall expenses per physician. Hospitals and physicians must resolve this issue, or struggling margins could have devastating consequences for doctors and patients.