Costs up, revenues down for medical groups, survey finds

Doctor putting money in pocket
Unlike many other businesses, medical practices can’t pass on rising costs to patients. (Getty/Niyazz)

A new survey paints a tough financial picture for medical groups.

In 2017, medical groups saw a continuing increase in cost pressures and an inability to grow revenues, leading to diminished operating results, according to a survey conducted by the AMGA's consulting division. The survey was based on data from 49 organizations representing more than 13,000 physicians.

Specifically, the operating loss per physician increased from 10% of net revenue in 2016 to 17.5% of net revenue in the 2017 survey. Total losses per physician during the two-year period increased from a median $95,138 to $140,856 per physician. At the same time, while gross professional revenue increased from a median of $1.2 million to $1.3 million, the median net professional revenue decreased from $682,735 to $681,322, according to the AMGA, a trade association that advocates for transformation of healthcare among medical groups.

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“The results of this survey suggest that groups must be diligent in managing their operational imperatives of their organizations,” said Fred Horton, president of AMGA Consulting. “Without real focus on operational costs and processes, there is a significant inability to grow revenues in a manner that will outpace practice inflation.”

The report also looked at financial performance by group size and type. There was actually good news for private physician practices, which saw an increase in operating margin of $16,378 per physician, compared to a loss of $13,982 in 2016. However, integrated health systems saw an increase in the reported median operating loss per physician of $31,957 between 2016 and 2017. The 2017 operating loss increased about 15% to $243,918, compared to the 2016 median loss of $211,961, the report said.

Small to mid-size integrated groups reported increasing operating losses per physician. Large groups, with more than 300 physicians, saw a decrease of operating loss, from 2016’s loss of $172,746 per physician to a loss of $35,477 per physician in 2017.

Unlike many other businesses, medical practices can’t pass on rising costs—such as increasing rents, employee salaries and utilities—to patients, making it critical that they look for ways to control costs.

Another physician organization, the Medical Group Management Association, said better-performing practices are able to control information technology expenses, spend less on operating expenses, achieve greater physician productivity and implement better practice operations. The group also found that hiring more nonphysician providers and support staff is among the factors that can make practices more profitable and productive.