Medical group practice costs outpace revenues

Medical group practices’ revenues failed to keep pace with swelling operating costs in 2007, according to the Medical Group Management Association (MGMA) 2008 Cost Survey Reports.

For example, multispecialty practices reported a 5.53 percent increase in median total medical revenue, while median operating cost increased by 6.45 percent. Some single-specialty practices experienced a similar trend.

The good news is that the rate of increase in operating costs appears to have slowed. In 2006, multispecialty practices’ operating costs rose by 4.64 percent more than revenue in 2006. In 2007, that gap shrank to 3.72 percent. However, one of the hardest hit sectors, multispecialty primary care practices, saw this gap expand to 6. 29 percent.

A number of single-specialty practices reported increases in medical revenue that lagged behind increases in operating costs, according to the survey data. For example, median total medical revenue for cardiology practices decreased 0.61 percent while median operating costs rose 6.3 percent. Family practice, OB/GYN, pediatrics and orthopedic surgery groups reported similar trends.

Gastroenterology and general surgery practices defied this trend, though, experiencing similar rates of increase between their medical revenues and operating costs.

Several specialty practices watched their total operating cost per full-time-equivalent (FTE) physician decline or flatten. Cardiology, family practice and pediatrics groups, for example, posted increases in total operating cost per FTE physician, while orthopedic surgery, OB/GYN and urology groups reported decreases.

Costs for medical malpractice insurance differed among specialties. After decreasing in 2006, rates increased in 2007 for cardiology groups. OB/GYN practices reported declining insurance costs for the second consecutive year, and orthopedic surgery and general surgery groups reported decreases for the first time in four years.

This year’s Cost Survey Reports represent data submitted by practices that provided information on nearly 30,000 providers – the largest provider population of any cost survey report in the United States. The single-specialty report includes new data for radiology practices. The multispecialty and single-specialty reports include new data on total medical revenue by type of payer.