High labor costs are keeping hospitals from financial growth and continue to challenge the bottom line, according to Kaufman Hall's National Hospital Flash Report, based on data from 1,300 physicians.
Five things to know:
1. Labor expenses per calendar day were up 5% year over year in September. Year to date, labor expenses grew 5% per calendar day over last year.
2. 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
3. Medical groups are also experiencing high labor costs, with 84% of the group's total expenses attributed to labor, according to Kaufman Hall's Physician Flash Report based on data from more than 200,000 providers. The average subsidy per employed physician was $304,312. This is the first time it's exceeded $300,000.
"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."
4. Provider and physician compensation per full time employee was up 3% in the third quarter. Physician pay in the third quarter per FTE hit $369,392 while provider compensation per FTE was $305,533.
5. Beyond labor expenses, hospital finances are relatively stable, although the average hospital margin dipped slightly to 4.3% after four months of hovering around 4.7%.