MGMA: Medical practice costs skyrocket, operating budgets get cut

Despite the fact that general medical practice operating costs have skyrocketed, these multispecialty practices (not owned by hospitals) slashed general operating expenditures 2.2 percent in 2010, according to a cost survey released Sept. 20 by the Medical Group Management Association (MGMA).

According to “Cost Survey for Multispecialty Practices: 2011 Report Based on 2010 Data,” general operating costs at medical practices have increased 52.64 percent to $252,629. These costs surpassed revenue gains during this time period.

Meanwhile, MGMA reported that total revenue in multispecialty practices that are not owned by hospitals or delivery systems increased 45.87 percent since 2001 and 8.5 percent since 2009. The survey suggested that these increases may be a result of practices more closely monitoring operating expenses.

While the survey showed that drug supply costs decreased 8.52 percent, total expenditures for support staff increased 4.78 percent since 2010. Additionally, the costs for medical and surgical supplies shot up 7.43 percent.

“The tenor of these findings speaks to an environment of conservatism,” said William F. Jessee, MD, MGMA president and CEO. “In an effort to reinforce themselves against a draconian proposed cut to Medicare payments, as well as other factors, they have worked to reduce operating expenses, and renegotiate rates with vendors, supply companies and insurance carriers. This means medical practices are not spending as much money as they were last year, which isn't necessarily a good thing. There is only so much more practices can do to cut expenditures without inhibiting their ability to run a successful, innovative practice.”

The survey showed that mean Medicare fee-for-service charges for practices with 10 full-time equivalents (FTEs) or fewer was 30.43 percent while the mean revenue was only 25.75 percent. These numbers for practices with 26 to 50 FTEs was 24.08 percent vs. 21.31 percent, respectively.

While total gross charges for practices with 10 FTE or fewer was more than $1 million, total medical revenue was reported to be about $696,000. For practices with 26 to 50 FTEs, charges were nearly $1.5 million and revenue equated to $884,503.

The cost survey includes data from more than 44,000 providers and 1,994 groups.