ENGLEWOOD, Colo., Oct.1, 2009 – For the first time in several years, data from the Medical Group Management Association (MGMA) indicate that revenue in medical practices declined in 2008. The drop may be tied to smaller patient volumes and increasing bad debt due to patients’ financial hardship. Medical practices responded by trimming overhead costs, but not enough to accommodate shrinking revenues.

According to the MGMA Cost Survey: 2009 Reports Based on 2008 Data, multispecialty group practices saw a 1.9 percent decrease in total medical revenue in 2008. MGMA captures data on both multispecialty groups and single-specialty practices, but uses multispecialty data as a proxy for overall trends. While each medical specialty’s cost and revenue drivers are unique, falling revenues may be attributable to a decline in patient volume, indicated by a 9.9 percent drop in the number of procedures and an 11.3 percent slump in the number of patients from 2006 to 2008.

Additionally, bad debt in multispecialty group practices from fee-for-service charges increased 13 percent from 2006 to 2008, suggesting that patients may be having a harder time paying their medical bills.
MGMA data indicate that total operating cost increased 54 percent in multispecialty group practices in the past 10 years, while total medical revenue increased 46 percent. Overall cost increases were due to a variety of factors, including increases in drug supply costs, support staff costs and professional liability fees.

In 2008, multispecialty practices reduced their overhead expenses 1.4 percent, largely by cutting support staff costs by 1.5 percent — the first decline in several years. Support staff costs make up 32 percent of medical practice expenses. Support staff includes general administrative, accounting, information technology and maintenance employees. Interestingly, while medical groups reduced support staff costs, their total worker count remained constant, indicating that employees may have gone without raises, bonuses or perhaps even suffered pay cuts.

The MGMA Cost Survey: 2009 Report Based on 2008 Data for Single-Specialty Practices also revealed trends distinct to specialty practices. OB/GYN and gastroenterology practices experienced decreases in total medical revenue after operating costs.

Cardiology, family practice, anesthesiology, pediatrics, orthopedic surgery and urology groups fared better, reporting increases.
“These data demonstrate the trickle-down effect that a tough economy can have on a collection of businesses that are already stressed by crushing administrative burdens,” said William F. Jessee, MD, FACMPE, president and CEO of MGMA. “Even in a good economy, many of our member practices have trouble staying financially solvent, so now it’s more important than ever that practices look for ways to operate as efficiently and effectively as possible.”

This year’s Cost Survey Report contains data on 33,000 providers — the largest provider population of any cost survey report in the United States. MGMA has produced these reports for more than 50 years. This year, for the first time, the Cost Survey Report includes legal and consulting fees in medical practices, new benchmarks for procedures and charges, and expanded data and analysis for integrated delivery systems.

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

Source: Press Release