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Medical groups generated a profit in 2019, while health system-affiliated groups took losses

The numbers don't necessarily reflect worse performance among system-affiliated groups, but rather a different mix of expenses and services.

Jeff Lagasse, Associate Editor

AMGA's newly released 2020 Medical Group Operations and Finance Survey reveals that, although most groups saw improved financial performance in 2019, independent medical groups generated a profit, while health system-affiliated groups faced a loss.
 
The survey shows the overall median profit/investment (P/I) per provider in 2019 to be -$22,028, an improvement from -$57,426 in 2018. For health system-affiliated medical groups, the overall median loss per provider (also known as "investment per provider") in 2019 was -$163,994 in 2019, slightly better than -$165,050 seen in 2018. For independent medical groups, the profit per provider increased to $12,434 in 2019 from $5,200 in 2018.
 
The survey also measured median profit/investment (P/I) per physician. This metric includes financial performance divided by number of physicians only, whereas the per provider metric includes advanced practice providers (APPs) in the count of "providers."

WHAT'S THE IMPACT?

In 2019, the overall median per physician was -$32,985, a significant improvement from -$98,840 in 2018. For health system-affiliated medical groups, the overall median loss/investment per physician in 2019 was -$278,505 in 2019, a decline from the -$225,261 seen in 2018. For independent medical groups, the profit per provider increased to $16,603 in 2019, from $6,296 in 2018.

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The numbers don't necessarily reflect worse performance among system-affiliated groups, authors said. Rather, revenue from ancillary services – such as labs and scan work – is reflected in the bottom line of independent medical groups and not necessarily of those linked to a system. 

Also, certain expenses are exclusive to system-affiliated groups, such as centralized service expense allocations and system office allocations. To compensate for these nuances, AMGA analyzes compensation and product alignment, staffing ratios, and general volume-adjusted metrics.

When medical groups employ both physicians and APPs, the "per provider" metric is typically utilized, with the metrics being divided by the total number of both physicians and APPs providers.
 
P/I per physician or provider is a high-level metric of overall medical group performance. At the group level, this value represents an all-encompassing measure of all revenues and expenses for the medical group. It also takes into consideration system or overhead allocations, which may be applied differently from organization to organization.
 
In 2019, median expense type as a percentage of overall clinic costs (per physician) were split into three primary categories. Provider compensation and benefits accounted for 61% of expenses, staff salaries and benefits accounted for 21%, and other operational expenses accounted for 18%. The percentage of provider compensation and benefits increased from 56% in 2018. This creates a greater need for practices to be performing at optimal levels, given that the remaining percentage for staff salaries and benefits and operational expenses is shrinking.

THE LARGER TREND

Uneven performance has been the name of the game during the pandemic. After months of shaky performance reports from the nation's hospitals, November held much of the same, according to Kaufman Hall's December Flash report, which examines metrics from the previous month. Hospital operating margins and revenues fell as expenses continued to rise above budget expectations and above 2019 levels.

November's median hospital operating margin came in at 2.5% year-to-date with the Coronavirus Aid, Relief, and Economic Security Act funds and -1.1% without them. The hospital EBITDA margin with CARES Act funding was 7.6% and 7.2% without.

When comparing these figures to 2019, margins were down and hovered right around budget. Operating margins were down more than 56% year-to-date and more than 11% year-over-year, yet were 0.1% above budget, not including CARES Act funding. Operating EBITDA fell by more than 35% year-to-date and 11% year-over-year. It was nearly 2% above budget without CARES.
 

Twitter: @JELagasse
Email the writer: jeff.lagasse@himssmedia.com