Doctors make revenue, productivity gains in Q3, but expenses also tick up, report finds

Physician activity came roaring back in the second and third quarters of this year, with physician productivity and revenues surpassing both 2019 and 2020 performance.

Physician expenses, however, also climbed above pre-pandemic levels for a third straight quarter, due in part to increases in non-labor expenses such as drugs and medical supplies, according to Kaufman Hall's latest physician flash report.

As a result, the average investment/subsidy per physician full-time equivalent (FTE) rose 12.2% in comparison to the third quarter of 2019 to $231,654 in the third quarter of 2021, according to the report, which draws on data from nearly 100,000 providers representing more than 100 specialties. 

The second consecutive quarter of significant physician revenue increases followed three quarters of revenues holding relatively steady at pre‑pandemic levels of less than $600,000. Net revenue per physician FTE (including advanced practice providers or APPs) rose to $660,762 in the third quarter, up 4.4% from $632,691 in the second quarter and up 11.4% from the third quarter of 2020, according to the report's analysis.

Physician productivity—measured as physician work relative value units per FTE—increased 9.4% compared to the third quarter of 2020. 

RELATED: Physician productivity, revenues rebounding to pre-pandemic levels: report

“Physician activity has come roaring back in the second and third quarters of this year,” said Matthew Bates, managing director and physician enterprise service line lead with Kaufman Hall in a statement.

“We’re seeing significant increases in physician productivity and revenues, but higher expenses are driving increases in physician investments. Also concerning is the ever-widening gap between practices requiring the highest versus the lowest levels of investment, suggesting the emergence of clear winners and losers as physician practices prepare for a COVID-19 endemic future," Bates said.

Improvements for the quarter varied widely across different specialty cohorts. Primary care, for example, had revenue and productivity gains and a decrease in investments from the second to the third quarter while surgical specialties experienced revenue and productivity declines accompanied by an increase in investments over the same period.

Physician expenses continued to escalate, surpassing the $900,000 mark due in part to higher revenue cycle costs, and increases in drugs and supply expenses. Total direct expense per physician FTE rose to $914,045 in the third quarter, up 4.4% from the second quarter, 13.2% from the third quarter of 2020 and 10.8% from the third quarter of 2019. Expenses increased across all specialty cohorts between the second and third quarters

Nationwide, the average investment/subsidy per physician FTE inched up to $231,654 in the third quarter, but the gap between practices requiring the highest versus the lowest levels of investment continues to grow. The difference between the investment/subsidy per physician FTE for practices in the 25th versus the 75th percentile increased more than $43,000 from $312,533 in the third quarter of 2019 to $355,675 in the third quarter of 2021. Contributing factors likely include wide variances in the pace of COVID‑19 recovery, including how quickly patients are returning to physician offices across different geographic regions and specialties, according to the report.

RELATED: Physician productivity, revenues fell steeply in 2020 due to COVID-19 volatility, Kaufman Hall says

While the averages clearly show performance above pre‑COVID‑19 levels, the widening gap between high and low performers also is an important and alarming part of the story, the report authors wrote.

"Clear winners and losers are emerging across the U.S. as physician practices and the health systems that employ them prepare for a COVID‑19 endemic future," the report authors wrote. "As they look ahead, healthcare leaders should consider the influence of both internal and external factors on their go-forward performance. While many of the challenges of 2020 and 2021 can be attributed to the pandemic, it is clear that some systems are beginning to feel the pressures of unsustainable physician investment levels and are taking action to bend the curve."