AAOS Bulletin - October, 2005

Orthopaedic revenues, expenses keep increasing

MGMA 2004 Cost Survey provides a benchmark for your practice

By Steven E. Fisher, MBA

Ever wonder where your practice stands in relation to others? Are your expenses higher or lower than average? Are you seeing as many patients or performing as many procedures as other similar practices?

The Medical Group Management Association’s (MGMA) recently released Cost Survey for Orthopaedic Practices: 2004 Report Based on 2003 Data is one way to get a sense of how your office compares to others. This annual survey collects information about gross charges, total medical revenue and practice expenses by category, as well as staffing, Resource Value Units per physician, patients per physician, procedures per physician and office square footage. The most recent report is based on 127 usable responses from orthopaedic practices around the country. Responding groups had a mean of 10.33 physicians.

Key results

Although the sampling is small, comparing recent reports can be useful in identifying trends. Among the key findings in the 2004 Survey are the following:

Revenues: The mean total medical revenue per full-time employed (FTE) physician in the 2004 survey was $1,055,954, compared to $954,742 in 2003 and $901,742 in 2002.

Patients and procedures: In 2004, the mean number of patients seen per doctor was 1,878, compared to 1,895 in 2003 and 2,724 in 2002. Physicians are also seeing more Medicare patients; the percent of patients in Medicare has increased from 22.95 percent in 2002 to 25.17 percent in 2004.

In 2004, physicians reported performing 9,031 procedures, compared to 8,690 in 2003 and 8,049 in 2002.

Expenses: Expenses per FTE physician have been steadily increasing: $489,329 per the 2004 survey, versus $457,441 in 2003 and $396,692 in 2002. Between 2002-2003, the increase in revenues was not enough to offset the increase in expenses. Consequently, the overhead ratio (operating expenses divided by net medical revenue) increased significantly, from 44.49 percent to 49.45 percent. Between 2003-2004, expenses continued to increase, but were offset by higher revenues so that the overhead ratio dropped to 47.11 percent.

Minor variations notwithstanding, expenses consume nearly half of every dollar received in revenue, and this is trending upward. Most of these expenses (70 percent) fall into one of four categories: staff salaries, building and occupancy, employee benefits, and medical and surgical supplies. Although professional liability insurance expenses are high in many states, the MGMA survey does not break these costs down by state.

Staffing: Orthopaedic office staffing continues to increase. In the 2004 Survey, the mean total support staff per FTE physician was 5.83, compared to 5.61 in 2003 and 5.46 in 2002.

Accounts receivables: Practices’ accounts receivable (A/R) per FTE physician have increased steadily over the past three years. In the 2004 Survey, A/R per FTE physician were $385,344 compared to $353,557 in 2003 and $323,481 in 2002.

What’s it mean for you?

The above statistics may or may not be applicable to your orthopaedic office for a variety of reasons. First of all, the data are based on voluntary responses by MGMA members. Respondents to the survey vary from year to year, and not all answer every survey question.

It may not be possible to extrapolate data from the 127 usable responses and apply it to the more than 5,000 orthopaedic practices in the United States, particularly when you consider that one in four AAOS members is in solo practice. By contrast, 90 percent of the practices responding to MGMA’s 2004 Survey consisted of more than three FTE providers, and one in four had more than 13 FTE providers.

In addition, the statistics cited reflect national averages; there can be significant variations from region to region, as well as within regions (e.g., New York State versus New York City). Finally, individual offices vary greatly in terms of how they operate.

That said, the MGMA Cost Survey for Orthopaedic Practices represents an excellent way for orthopaedists to get a basic sense of how they compare to other offices over a wide range of operating variables. Members and their administrators are encouraged to contact MGMA and order the complete Survey report. Contact MGMA’s at (877) 275-6462 or visit their Web site at http://www.mgma.org

Steven E. Fisher, MBA, is manager, practice management affairs at AAOS. He can be reached at (847) 384-4331 or sfisher@aaos.org

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