Costs Rise Faster than Revenue

The Medical Group Management Association (MGMA) does an annual cost survey of medical offices. It won’t be a surprise to any practicing physician who runs an office that practice costs increased by 7.4% while revenue rose only 1.8%. Family practice, cardiology and general surgery fared the worst with even lower revenue gains against losses from last year. Pediatrics and orthopedic surgery were among the specialties with a positive picture of revenue to cost. The MGMA cost survey is based on data submitted by more than 38,460 providers.

I can tell you that receptionists, filers and medical assistants want raises each year. The cost of insurance and rent goes up annually. The answering service is charging more. Supply cost goes up, even though we try to use various vendors and get the best price. I won’t even mention the fact that our exam tables are looking pretty shabby and should be replaced. We bought new computers this year…ouch!

In the meantime, Wellpoint, Aetna, UnitedHealth and HealthNet are posting record profits for their investors. They are the wall street darlings which tells me that the medical cost ratio is low. According to Wikipedia the “Medical cost ratio (MCR) is a metric used in managed health care to measure medical costs as a percentage of premium revenues. It is calculated by dividing those premiums allocated for fully insured or self-funded health care coverage into the total expenses for inpatient, professional (physicians and other licensed providers), outpatient, and pharmacy. (Briefly, MCR = Costs/Premiums.)”

Lest you think I am picking on the big for-profit insurers…Medicare is a huge issue also. The waste and bureaucracy create expensive hoops that physicians must jump through just to get paid a rate that doesn’t cover the cost of business.

Physicians are at the losing end of the MCR. When physicians lose, so do the patients. Note my prior post on the looming shortage of physicians. When practice costs increase faster than revenue, we have a situation that cannot continue.

Perhaps many readers of EverythingHealth are business people. You get it, right?

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