Confronting cost pressures in your medical practice: Short- and long-term strategies

Average year-to-date operating expenses for medical groups are up about 11% in 2025 compared to 2024 levels, but not all areas of cost are equally culpable for that spike.

A July 8, 2025, MGMA Stat poll found that nearly two-thirds (65%) of practice leaders point to labor as the area with the biggest cost increase by percentage, followed by supplies (17%), technology (12%), facilities (4%), and “other” (2%). The poll had 294 applicable responses.

Labor costs

Respondents told MGMA that labor costs were driven largely by inflation, persistent staffing shortages, and intense competition for qualified candidates. Practices reported significant wage increases, with benefit costs rising even more sharply. As highlighted in  the 2025 MGMA DataDive Management and Staff Compensation data report, median total compensation for clinical staff and nursing roles has surged between12% (for patient care assistants) to 38.4% (for certified nursing assistants) over the past five years.

• Primary care: Retail competition and rising minimum wages continue to pressure practices to increase compensation across a variety of roles. Practices can tap phased-retirement nurses or community colleges and adopt care pods with basic AI scribes for relief.
• Surgical specialties: OR nurses typically command premium pay differentials due to shortages. Immediate solutions: split-shifts or condensed OR scheduling. Longer-term: Stand up an in-house RN fellowship (orthopedics/ASC model) in partnership with nursing schools.
• Nonsurgical specialties: Infusion-suite RNs and techs’ wage increases often drive overall labor increases. Short-term responses include cross-training MAs and implementing virtual nurse triage models.
• Multispecialty groups: Physician recruitment expenses rose due to higher guaranteed salaries. Quick solutions: centralized recruitment and cohort onboarding. Strategically, flexible compensation models (such as salary floor plus productivity) provide lasting stability.

Supplies

The outlook for supply costs remains volatile. As medical groups continue prioritizing cost management more aggressively to offset rising labor expenses, most respondents to a recent MGMA-MGMA BestPrice survey reported plans to reduce supply chain spending over the next year, with more than one-third of all respondents targeting a 1% to 10% reduction in costs this year. 

However, these goals may be purely aspirational. Continuing inflationary pressures increase the real cost of supplies, and a greater share of respondents anticipate that their supply chain budget will increase in the next fiscal year. When budgets tighten, these leaders often target cuts to nonclinical supplies, capital equipment, facility upgrades, and training and professional development.

• Primary care: Practices increasingly focus on reducing nonclinical supply spending, deferring capital equipment, and limiting training/professional development to control budgets.
• Surgical specialties: Many medical device manufacturers for surgical implants and single-use surgical kits costs have raised prices reflecting their higher costs for raw materials — a cost concern for practices compounded by drug shortages leading to costly spot buys. Quick relief includes consignment implants and Kanban inventories; strategically, vendor-managed inventory contracts deliver savings (MGMA Stat).
• Nonsurgical specialties: Buy-and-bill biologics and chemotherapy drugs costs have risen amid shortages. Practices may look to doing split-fill dosing or dose-banding these high-cost drugs to limit wastage. Longer-term moves might include the use of white- or clear-bagging, or joining the trend of aggressive adoption of biosimilars.
• Multispecialty groups: With numerous different specialties ordering a wide variety of items (e.g., a high number of unique stocking keeping units, or SKUs), multispecialty groups often struggle to achieve significant volume discounts. Immediate strategies might include consolidating purchases under a single group purchasing organization (GPO) and standardizing formularies to streamline ordering. In the long-term, organizations with scale to develop specialized, analytics-driven supply chain teams can gain efficiency and cost savings by optimizing purchasing across all specialties.

Technology

Increased cybersecurity mandates and wider adoption of AI significantly raise technology spending.

• Primary care: Intensified focus on cybersecurity requirements after the 2024 Change Healthcare outage, along with continued adoption of AI tools, are key areas in which primary care practices see their technology spend rising. Quick cost relief efforts might include securing insurer credits after NIST Cybersecurity Framework (CSF) assessments.
• Surgical specialties: Many practices with robotic platforms and image-guided surgical systems have transitioned from traditional capital expenditures to subscription-based pricing. Increased costs from this shift might be mitigated through short-term delays on elective upgrades or exploring multi-tenanting systems in which practices share a single instance. Similar approaches can be used for capital-sharing arrangements among surgical centers.
• Nonsurgical specialties: Broader use of remote patient monitoring (RPM) comes with costs that are offset partially by CMS reimbursements. For practices just starting, target RPM for high-margin conditions; longer-term, integrate RPM data into risk-sharing contracts.
• Multispecialty groups: Just as in primary care, spending rose sharply post-high-profile cybersecurity breaches. Immediate actions include NIST CSF assessments for insurer discounts; longer-term moves toward zero-trust cybersecurity frameworks and consolidating EHR/RCM platforms help control spending. [MGMA members can get a more holistic view of strategies in the Cybersecurity in Medical Practices Playbook.]

Facilities and beyond

Facility costs continue facing steady increases and expansions. Per a CBRE Q1 report of medical outpatient buildings (MOBs), rents are stable at an average of $25.03 per square foot, down slightly from a record high last year of $25.08. These costs still face steady annual escalations and rising utilities. Beyond the renegotiation of leases or subleasing idle areas after hours to urgent care where appropriate, practices might look to longer-term savings from energy-saving upgrades.

Elsewhere, malpractice premium hikes are increasingly common. Practices can promptly join insurers' risk-management programs for immediate savings; larger groups (more than 25 full-time-equivalent providers) should consider captives or group purchasing pools.

• Surgical specialties: ASC construction costs are expected to rise, as tariffs on steel and aluminum (used for HVAC systems and more) push equipment and installation prices higher, as well as continued higher interest rates to finance projects. Practices can enhance revenues with increasing elective case scheduling or introducing cash-pay bundled pricing to boost immediate cash flow to help offset higher facility costs. For longer-term strategy, some organizations may consider sale-leaseback arrangements to free up capital for reinvestment in growth or other operational needs.
• Nonsurgical specialties: Facility expansions, particularly infusion-suite buildouts, remain costly. Practices can temporarily add chairs to existing exam rooms to avoid immediate capital costs.
• Multispecialty groups: Identifying and shifting low-acuity visits to lower-cost locations can be a quick fix. Over time, leaders should consider strategically co-locating ancillaries (e.g., labs, imaging) with higher-margin specialties to enhance profitability.

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