Operating Loss per Physician Grows to 17.5% of Net Revenue

Operating Loss per Physician Grows
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Physicians in the United States are continuing to see negative operating income because of their increased operating costs. This has resulted in a net revenue loss of 17.5% per physician in 2017, compared to 10% in 2016. This information was reported in the American Medical Group Association’s (AMGA’s) 2017 Medical Group Operations and Finance Survey.

The survey presents data gathered from 49 organizations, which represent more than 13,000 physicians. Included in the survey are financial summaries based on the size, region, and percentage of capital new revenue.

The purpose behind AMGA is to represent medical groups and integrated systems in order to advocate, educate, innovate, and empower its members to serve with the highest degree of performance in the healthcare sector. The survey was completed in order to help healthcare service providers and businesses with assistance in the changing industry environment.

How Do the Numbers Get Broken Down?

When looking at the 2017 numbers in more detail, there is a big difference when compared to the prior year. As mentioned above, in 2016, the operating cost per physician loss was 10% of net revenue. In 2017, that moved up to a 17.5% operating loss against net revenue. The median dollar value of the loss per physician went up from $95,138 to $140,856.

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From 2016 to 2017, the median net professional revenue decreased to $681,322 from $682,735. This is the net amount after all business costs are factored into the revenue numbers.

In the survey, even the type of practice is broken down. Physicians who worked under privately owned operations saw a loss of $13,982  in 2016, but a profit of $2,396 per physician in 2017—which is a slight turnaround. This was the only really positive number that was reported in the survey. The same could not be said about small- to mid-sized integrated health system companies; a loss per physician of $243,918 was calculated in 2017, compared to a loss of $211,961 in 2016. Most  small- to mid-sized integrated health systems operate with between 13 and 15 employees.

Larger integrated healthcare service providers (with more than 300 physicians) saw an operating loss per physician of $35,477 in 2017. This was a better-than-reported revenue number from the previous year, when there was a median operating loss of $172,746.

Why Are There Negative Operating Losses per Physician?

Running a physician practice today is very costly. Expenses include things such as medical supplies, vaccines, and equipment. There are times that physicians are forced to upgrade their equipment as a result of changes in technology.  One example of a mandatory upgrade is having the most updated technology for the International Classification of Diseases. This could cost a practice upwards of $56,000.

Looking on the other end, the revenue side of the business doesn’t show much optimism. The reimbursement rates from government programs are not keeping up with the cost side of the business. In addition, insurance companies that look at various claims are taking longer to make payouts. This is harming the cash flow of the physicians. Also, insurance companies are denying more claims now than ever before. This again results in the physician incurring increased costs, with no equivalent revenue increase being accounted for; this is part of why there is a higher operating loss per physician.

In a year’s time, when the survey is updated, there is quite a possibility of seeing even more of a negative operating loss per physician. This is because President Donald Trump is looking to eliminate the reimbursement government program, which is critical for a physician running a business.

 

Sources

AMGA 2017 Medical Group Operations and Finance Survey Indicates that Healthcare Organizations Face Increased Cost Pressures amid Revenue Growth Challenges,”American Medical Group Association, , January 8, 2018.

Operating loss per physician grows to 17.5% of net revenue: 6 AMGA survey findings,” Becker’s Hospital CFO Report, January 8, 2018.

Physician practices grapple with new financial pressures,”Modern Medicine Network, November 6, 2014.

Trump will end health care cost-sharing subsidies,” CNN, October 13, 2017.

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Categories: Economic Report, News

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