An alternative;
UPDATE a SET [Status] = 1
OUTPUT inserted.Id, inserted.EntityID, inserted.EntityType, inserted.EntityOperation
FROM (SELECT TOP (1) Id, EntityID, EntityType, EntityOperation, [Status]
FROM ATH_SyncEntities a
WHERE [Status] = 0
ORDER BY EntityType, ID) a
Edit: What's the clustered index on table ATH_SyncEntities ?
For fast, accurate and documented assistance in answering your questions, please read this article.
Understanding and using APPLY, (I) and (II) Paul White
Hidden RBAR: Triangular Joins / The "Numbers" or "Tally" Table: What it is and how it replaces a loop Jeff Moden