The state of labor costs: 3 stats to know

Despite practices tightening their budgets, the cost of providing healthcare is increasing from nearly all angles.

Here are three recent updates on the costs associated with healthcare that ASC leaders should monitor:

1. Medical groups are spending more per physician in 2023 than previous years. 

A recent report by the American Medical Group Association found that the median expense per physician in 2023 increased from $905,283 to $1,036,238. Despite a slight uptick in revenue compared to the previous year, the median loss faced by medical groups per physician was $249,000. The AMGA attributed the increase to issues with ongoing labor shortages.

Compared to pre-pandemic levels, median total revenue per physician has increased 9.1%, while median total expense per physician increased 26.5% over the same period. 

2. The cost of practicing medicine is rising. 

Inflation — specifically in healthcare — continues to grow. The Medicare Economic Index, which measures medical practice cost inflation, increased 4.6% in 2023, the highest in the last 23 years. Despite this, CMS' finalized fee schedule reduced overall physician pay by 1.25% and updated the conversion factor to $32.74, a 3.4% decrease over last year.

3. Some ASCs have had to spend one-quarter or more of their net operating revenue on employees to stay ahead of shortages.

The average percentage of operating revenue ASCs spent on paying employees was 21.3%, according to a report from VMG Health. However, the highest spenders paid 29% of their earnings to compensate staff.

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