After a rocky start to 2022, many physician groups saw early evidence that financial performance may be stabilizing as patient volumes and revenues improved in March.
However, higher volumes also contributed to higher investments and subsidies needed to support physician practices and ongoing expense increases as practices contend with inflation and a tight labor market, according to Kaufman Hall's latest physician flash report.
For the first time in two years, the median investment/subsidy per physician full-time equivalent surpassed levels seen during the start of the COVID-19 pandemic. The metric jumped 14.4% from the fourth quarter of 2021, climbing to $288,000 in the first quarter of 2022. That's up 1.5% compared to the first quarter of 2020 and an 8.9% increase from the same quarter last year.
While some of the increase might be attributed to annual bonuses and incentive payments that are paid annually in the first quarter, rising operational costs pushed this metric to its highest level since the first quarter of 2020, the report noted.
Higher patient demand drove significant increases in physician productivity and bumped up revenues for the quarter. Including advanced practice providers, net patient revenue per physician FTE rose 1% from the fourth quarter of 2021 to $636,674 this past quarter. This metric was up significantly year over year at 9.6%, according to Kaufman Hall.
Physician productivity rose across all measures, with physician work relative value units (wRVUs) per FTE up 7.4% quarter over quarter, 15.4% year over year and 20.2% compared to first quarter 2020. The increased productivity helped push physician compensation to its highest level in two years.
Physician revenues also rose with higher patient volumes and increased productivity. Median physician compensation per FTE rose 3.6% quarter over quarter to $349,072 in the first three months of 2022. This metric was up 6.6% compared to the same quarter in the prior two years.
Psychiatry had the largest quarter-over-quarter increase, rising 7% to $331,301 for the first quarter of this year.
However, increased physician productivity drove physician compensation per wRVU down 5.8% after two quarters of increases, as improved productivity outpaced compensation. Physician productivity, as measured by physician wRVUs per FTE, increased 7.4% quarter over quarter, 15.4% year over year and 20.2% compared to the first quarter of 2020.
At the start of 2021, the Centers for Medicare & Medicaid Services made significant changes to current procedural terminology code wRVU values. Those changes especially affected select specialties such as family medicine and internal medicine, and they were a factor in the increase in wRVUs from 2020 level, according to the report.
“Physician subsidies and expenses both reached two-year highs in the first quarter, and both metrics appear to be on an upward trajectory for the foreseeable future,” said Matthew Bates, managing director and Physician Enterprise Service Line lead with Kaufman Hall. “At the same time, per-physician productivity and revenues had sizable increases. Physician leaders must continue to closely monitor these trends and identify opportunities for improvement to manage the cost curve going forward.”
Expenses continued to rise with increased patient demand, inflation and a competitive labor market. A shortage of qualified healthcare workers and front office staff amid nationwide labor challenges contributed to the increases, according to the report.
Total direct expense per physician FTE rose to a two-year high of $946,602 for the quarter, up 7.1% from the same period a year ago and 10.5% year over year.