Revenue in medical practices declined in 2008 for the first time in several years, according to the Medical Group Management Association (MGMA). 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. 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.
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. 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. The total worker count remained constant, indicating that employees may have gone without raises, bonuses, or perhaps that pay cuts were made.
Read the MGMA press release.
