According to the 2016 Physicians Practice Physician Compensation Survey, 40.4 percent of survey respondents said their overhead is 41 percent to 60 percent of medical practice revenue. In comparison, 32 percent of respondents from last year's survey cited the same percentage of overhead. That means, over a period of one year, 8.4 percent more survey respondents said they were experiencing overhead costs that were close to or exceeding half of their practice revenue.
"Expenses related to goods and services always seem to go up, such as employee salaries, rent, utilities, and supplies," says Steven Fisher, an internist at Fairfield County Medical Group in Trumbull, Conn. "Therefore, the cost of doing business goes up. But unlike most businesses that can pass along increased expenses to consumers, primary-care physicians can't do that because of governmental regulations and the way that health insurance companies operate."
Paying staff to perform administrative duties probably tops the list of overhead expenses. "Physicians and their staff spend a growing amount of time ensuring that quality and performance measures are collected, documented, and reported," says Marc Mertz, vice president of El Segundo, Calif.-based GE Healthcare Camden Group. "Due to the Medicare Access and CHIP Reauthorization Act of 2015 (MACRA), requirements will continue to increase. Practices have also invested in EHR systems that support data collection and reporting, resulting in more administrative work."
What's more, "primary-care physicians are tasked with providing referrals and getting pre-authorizations for diagnostic testing and prescriptions," Fisher says. "In addition, given that many health plans now have high deductibles, practices have to chase patients to pay for services — sometimes billing them multiple times. In the past, insurance companies paid them directly."
Lowering overhead
According to the survey, overhead is going up while personal income is staying the same (40 percent) or going down (28.7 percent). So what can practices do to keep overhead down?
Fisher recommends examining every line item on your profit and loss statement, and seeing where you might be able to spend less or where you might be wasting money. For example, you can shop around for better prices on malpractice insurance. Physicians at Fisher's practice saved $5,000 on malpractice premiums, and gained CME credit by taking courses on reducing malpractice risk that were offered by the insurer.