Economists explain “peak profit” in the business cycle as the point when business earnings crest before economic growth slows. Early in this economic curve, rising demand, higher productivity, and economies of scale drive profits upward. At the peak, revenues remain strong, but overhead begins to climb faster than revenue. If businesses cannot raise prices to offset those higher costs, profits plateau and set the stage for a downturn. Peak profit marks the turning point in the business cycle from growth to contraction.

For medical group practices, the concept is particularly relevant. Government and large commercial payers wield significant leverage to set payment rates for most medical group practices. In past years, private practices countered the fixed prices with productivity gains and cost control, while hospital- and system-owned practices relied on subsidies from their parent organizations.

Previous MGMA Data Mine articles^1,2,3 chronicled how inflation, escalating staff compensation and benefits costs, and supply chain pressures steadily raised practice overhead as reimbursement stagnated or declined.

Evaluating the changes in practice performance over time requires consistent measurement, similar definitions and comparable data collection methods year to year — criteria met by MGMA surveys. Examining the information published over multiple years in the MGMA DataDive Cost and Revenue (combined this year with the Practice Operations data set to form a new Financials and Operations data set) provides insights into the short- and long-term economic situation for medical groups.