The same financial pressures hospitals are facing are increasingly evident at the physician enterprise level, according to Kaufman Hall’s latest quarterly “Physician Flash Report,” which is based on data from more than 200,000 employed providers — physicians and advanced practice providers — across more than 100 specialties.
Provider productivity continues to climb, even as reimbursement and compensation lag behind, according to the report. Provider productivity — measured by work relative value units per full-time equivalent — has increased 7% since 2023. Over the same period, provider compensation rose 6%, while reimbursement declined 1%, as measured by net patient revenue per provider wRVU.
The imbalance is driving higher practice subsidies.
The median investment — or subsidy — per physician reached $315,358 in the fourth quarter of 2025, a 4% increase since 2023. Labor expenses also remain elevated, accounting for 84.4% of total physician practice costs.
“The amount of downstream revenue that a provider needs to generate to cover a practice’s investment is increasingly unsustainable in this current financial environment,” Matthew Bates, managing director and physician enterprise service line leader at Kaufman Hall, said in a Feb. 10 news release. “Providers are working more but are being paid less for their work. Patient demand is up, yet reimbursement is falling.”
Assuming a median hospital operating margin of 1.3%, consistent with the “National Hospital Flash Report,” Kaufman Hall estimates that at a median subsidy of $236,290 per provider, physicians would need to generate roughly $17 million in downstream revenue to offset that investment.
The report also highlights continued workforce shifts, with advanced practice providers now comprising 40.7% of the provider workforce. While APPs are helping health systems meet rising patient demand, the data point to growing financial strain across physician enterprises as productivity gains fail to translate into improved reimbursement.
Together, the hospital and physician data underscore a common challenge: healthcare providers are delivering more care to more patients, but the economics supporting that care continue to deteriorate.
Click here to access Kaufman Hall’s physician report and here to access its hospital report.
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