Healthcare operating costs rising almost everywhere, report says

Operating costs in healthcare centers and hospitals across the country are rising amid inflationary pressures, staffing shortages and supply chain disruption, and such locations are going to have to continue implementing measures to help mitigate the highly challenging situation, according to a report from the Medical Group Management Association.

While revenues vary across locations, costs rose almost universally from 2019 to 2021 at both physician-owned and hospital-owned centers. 

The report broke down each of those two sectors into three areas: primary care, surgical facilities and nonsurgical facilities. The only area not experiencing a rise in operating costs over the 2019 to 2021 period was hospital-owned primary care facilities, where such expenses fell almost 11 percent.

"Rising expenses and the persistent challenges to restore productivity and revenue in healthcare organizations have led to several health systems reporting significant losses and others with many operating margins under 1 percent," the report said. 

"It is getting harder to pay the bills or even break even," one practice leader told MGMA in recent polling about inflation and surging expenses.

Such surging expenses are being caused by inflationary pressures and disruption to the supply chain, which has a knock-on cost effect on everything from information technology needs to administrative supplies. Medical malpractice premiums are also on the rise.

But one of the biggest cost factors is the staffing shortage. Staffing, which practice leaders had identified as the greatest financial challenge facing them at the beginning of 2022, remains the biggest headache, the report said.

"Labor is up 30% from a year ago," one medical group leader said in the report. "That has turned our margin negative."

To help counteract such a burden, medical centers will need to continue to eliminate spending on unnecessary supplies, closely monitor staff overtime and boost reimbursement from payers by offering incentives.

The full report can be found here.

Copyright © 2024 Becker's Healthcare. All Rights Reserved. Privacy Policy. Cookie Policy. Linking and Reprinting Policy.


Featured Whitepapers

Featured Webinars