Group Practice Cost Increases Outpace Revenues
Compounding economic pressures created by
reimbursement and crushing administrative burdens, operating costs rose
faster than revenue in many medical group practices in 2007, according
to the Medical Group Management Association (MGMA) Cost Survey: 2008
Reports Based on 2007 Data.
MGMA data indicate that over the past decade
operating expenses have risen from 58¢ to 61¢ per
dollar of revenue.
Multispecialty group practices reported a 5.5
increase in median total revenue; median operating costs increased by
6.5 percent. Many single-specialty practices reported a similar trend.
For example, cardiology practices’ median total medical
decreased 0.61 percent while their operating costs rose 6.7 percent.
Family practice, OB/GYN, pediatrics and orthopedic
surgery groups reported like conditions.
While each medical specialty’s cost
drivers are unique, some overall trends could be observed:
Drug supply – In
drug supply costs leapt 17 percent in 2007, compounding a 33 percent
increase from the previous year. Drug supply costs increased
dramatically for pediatric practices – 56 percent in 2007
creating a 132 percent increase in the past three years. MGMA data
indicate drug expenses drove costs among primary care specialties, in
Support staff –
Family practices, which
derive most expenses from employees, reported a 15.8 percent increase
in 2007. OB/GYN and pediatrics groups reported similar hikes in support
staff costs – 17.2 percent and 10.1 percent, respectively.
– OB/GYN groups
reported a 3 percent decrease in these costs, compounding a decline in
2006. Orthopedic surgery also posted a reduction of 7.4 percent. This
trend was not consistent among all specialties, however. For example,
cardiology groups reported an 8 percent increase in malpractice
insurance premiums in 2007, contributing to the 132.3 percent increase
they’ve experienced since 2000.
"Group practice leaders nationwide have been
their hands for more than a decade over the seemingly endless
trajectory of costs consuming a larger portion of practice revenues,"
said Dr. William F. Jessee, president and CEO of MGMA. "With no end in
sight to declines in reimbursement, rising inflation and the expanding
morass of red tape practices must contend with just to do business, we
believe that without intervention, practices won’t be able to
This year’s cost survey reports
submitted by practices that provided information on nearly 30,000
providers – the largest provider population of any cost
report in the United States. The single-specialty report includes new
data for radiology practices. The multispecialty report and
single-specialty reports include new data on total medical revenue by
type of payer.
Address: Medical Group Management Association, 104
Inverness Terrace East, Englewood, CO 80112; (303) 799-1111, www.mgma.org.