Group-practice costs outpace revenues driven by drugs, liability

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Compounding economic pressures created by declining 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).
 
MGMA data indicated that over the past decade, operating expenses have risen from $.58 cents to $.61 per dollar of revenue.

Multispecialty group practices reported a 5.5 percent increase in median total revenue; median operating costs increased by 6.5 percent, according to the data. Many single-specialty practices also reported a similar trend. For example, the median total medical revenues for cardiology practices decreased 0.61 percent, while their operating costs rose 6.3 percent.  

Some overall cost trends were:

  • Drug supply: In multispecialty groups, drug supply costs leapt 17 percent in 2007, compounding a 33 percent increase from the previous year. Drug supply costs increased 56 percent in 2007 for pediatric practices, creating a 132 percent increase in the past three years. MGMA data indicate drug expenses drove costs among primary care specialties, in general;
  • Support staff: Family practices, which derive most expenses from employees, reported a 15.8 percent increase in 2007; and
  • Professional liability: While the trend was not consistent among all specialties, cardiology groups reported an 8 percent increase in malpractice insurance premiums in 2007, contributing to the 132.3 percent increase since 2000.