Operating Costs Rise for Practices in 2013

A new survey shows medical practices are spending more on operating costs. The rise is tied to increasing regulatory requirements.

The cost of operating a medical practice in the Affordable Care Act era is on the rise.

The Medical Group Management Association’s new cost survey found multi-specialty medical practices spent $52,009 in business operations in 2013 for every full-time-equivalent (FTE) physician on staff. That’s a 4.6% increase from 2012. Those business operations costs include general administrative staff, information technology staff, accounting, and management care administration personnel.

MGMA pegs the spending to increasing regulatory burdens. They note healthcare practices not only must keep up with various insurance provider contracts, but also with varying government programs, as well as new healthcare metrics and new healthcare exchange plans.

“It’s extremely disappointing that medical practices are increasingly being forced to allocate more staff resources to manage onerous government regulations and processes,” said Anders Gilberg, the association’s senior vice president of government affairs, in a press release.

Physician-owned practices tended to have more support staff than hospital-owned practices and integrated delivery system-owned (IDS) practices. For instance, doctor-owned primary care practices had 4.94 support staff per FTE doctor. Hospital/IDS-owned practices had 3.5.

Multispecialty practices spent about 45.9% of their operating budgets on physician costs, but 37.2% on support staff.

The survey also found a significant gap in revenue between the southern United States and the rest of the US. Surgical single-specialty practices in the west, Midwest and eastern US earned around $400,000 per FTE doctor, after subtracting operating costs. However, similar practices in the south earned only $168,474 on average.

Surgical single-specialty practices earned $199,095 after expenses in the Midwest, $164,839 in the east, $81,877 in the west, and $54,210 in the south.

Operating expenses were highest among obstetricians/gynecologists, who spent more than 80% of their revenue on operating cost. That’s an 8% increase from 2012, enough to push OB/GYNs ahead of family physicians in terms of proportion of spending spent on operations.

Laura Palmer, FACMPE, senior industry analyst at MGMA, said the study shows medical practice executives are becoming more and more important.

“Employing staff with expertise in medical practice management can position the practice for long-term success and sustainability,” she said, in the press release.