MGMA Press Room
ENGLEWOOD, Colo., May 14, 2007 – The Medical Group Management Association (MGMA) recently released three specialty-specific cost survey reports for anesthesia, obstetrics and gynecology (OB/GYN), and pediatric practices. Used by group practices nationwide as benchmarking tools, these reports also highlight economic health measures for group practice. They also underline the extraordinary efforts made by medical group practice professionals to remain financially viable despite growing economic pressures from rising costs and declining reimbursements.
This report found that in 2005, anesthesia practices were high producers with median gross charges (a measure of productivity) of $1,474,695 per full-time-equivalent (FTE) physician. However, MGMA also found that these practices had extremely high payer-mandated contractual adjustments, because they collected just 44.2 cents for each dollar charged. Anesthesia practices’ payer mix was comprised largely of Medicaid (10.3 percent) and Medicare (30.1 percent) patients, whose lower allowed charges were compounded by commercial payers exacting high discounts. Therefore, these practices collected just a fraction of pay for services rendered.
Moreover, MGMA found that practices with the highest percent of government payers – those with more than 50 percent of their revenue coming from Medicare/Medicaid – posted lower net income in 2005 ($419,047 per FTE physician) than practices with 30 percent or less government payer mix ($428,012 per FTE physician).
OB/GYN practices managed to post a slight increase in total medical revenue after operating cost (net operating income) of 1 percent. This may be due to their efficiency in cost-containment procedures – OB/GYN practices managed to decrease their general operating costs in 2005 by 4.3 percent.
Practices offering ancillaries must balance those services’ substantially higher equipment and staffing costs with patient satisfaction, convenience, quality and care management benefits. Continuing the trend of OB/GYN practices adding ancillary services, MGMA’s report found that in 2005, 77 percent of surveyed OB/GYN practices provided in-office ancillary services. Interestingly, MGMA also found that those practices offering such services also had lower net income ($329,060 per FTE physician) than those practices that did not offer ancillaries ($375,853 per FTE physician).
This report indicates that in 2005, pediatric practices that made previous investments in information technologies (IT) may have reaped the benefits with marginal increases in net income. Net operating income for all pediatric practices increased 3.9 percent in 2005 while total general operating cost also increased at 3.1 percent to $168,428 per FTE physician. Larger practices spent almost $2,000 more per FTE physician on IT than smaller practices ($9,202 vs. $7,229).
Pediatric practices, like many other primary care providers, typically have very high overhead costs. The MGMA report found that in 2005, operating cost consumed 61 percent of pediatric practices’ revenues. Among the largest contributors to those high costs were drugs – specifically vaccines – constituting almost 20 percent of total overhead costs. In fact, the MGMA report found that pediatric practices paid nearly five times more for drugs than for liability insurance costs.
"As our data indicate year after year, many of these medical group practices – vital components of our country's health care delivery system – continue to operate on razor thin margins," said William F. Jessee, MD, FACMPE, MGMA president and CEO. "With medical groups facing approximately a 10 percent cut to Medicare physician payments next year, policymakers must recognize the financial peril group practices face. Congressional action is essential to preserve access to care for Medicare patients.” Note: MGMA surveys depend on voluntary participation and may not be representative of the industry. Readers are urged to review the entire survey report when making conclusions regarding trends or other observations