For medical groups, costs are up and revenues are down, survey says

The operating loss per physician jumped from a 10 percent loss of net revenue to a 17.5 percent loss.

Jeff Lagasse, Associate Editor

Medical groups have it pretty rough, according to a new survey. The American Medical Group Association's latest findings show an increase in cost pressures and an inability to grow revenues. And operating results are suffering as a consequence.

Hospital executives managing a stable of practices as well as independent medical groups should understand the findings to inform challenges and ways to grow their operations.

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The operating loss per physician jumped from a 10 percent loss of net revenue found in the 2016 survey to a 17.5 percent loss a year later. Total losses per physician during that period went from $95,138 to $140,856 per physician.

While gross professional revenue increased from $1,217,350 to $1,328,625 during this period, net professional revenue actually decreased from $682,735 to $681,322.

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The results also highlighted performance by group size and type. Interestingly, while private physician practices saw an increase in operating margin of $16,378 per physician (from a loss of $13,982 in 2016 to a profit of $2,396), integrated health systems saw an increase in the reported median operating loss per physician of $31,957 between 2016 and 2017 -- the 2017 operating loss increased about 15 percent, up to $243,918, compared to the 2016 reported median loss of $211,961.

The majority of integrated groups are small to mid-sized -- 13 of the 15 reported -- and these group sizes also reported increasing operating losses per physician. Large groups, with more than 300 physicians, saw a decrease of operating loss, from 2016's loss of $172,746 per physician to a loss of $35,477 per physician in 2017.

"Without real focus on operational costs and processes, there is a significant inability to grow revenues in a manner that will outpace practice inflation," AMGA Consulting president Fred Horton said. 

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