MGMA Survey Reveals Orthopedists Are Hit Hard by Operating Costs

ENGLEWOOD, Colo. -- Orthopedic practices are coping with significant cost increases, particularly from professional liability premiums and staff costs, according to the new Medical Group Management Association (MGMA) "Cost Survey for Orthopedic Practices: 2003 Report Based on 2002 Data."

Total median operating costs increased 12.3 percent from 2001 to 2002

as measured per full-time-equivalent (FTE) physician. Staffing costs

increased 8.1 percent and median total support staff per FTE physician

increased from 5.28 people to 5.44. Professional liability insurance

jumped 26.1 percent per FTE physician. MGMA data are national aggregates

and do not reflect the greater increases experienced in many states.

"One medical liability insurance premium quote for our practice was

more than our monthly revenue," said Marilyn J. Orr, MBA, CMPE, a member

of MGMA's Orthopedic Practices Ad Hoc Survey Committee and

administrator of the Dover (Ohio) Orthopaedic Center Inc. "Malpractice costs

are increasing at an unpredictable rate. Physicians are trying to

protect themselves by hiring more nonphysician providers and other more

highly trained -- and higher paid -- staff with the expectation that they

are less likely to make mistakes."

Also affecting orthopedic practices' bottom line is a payer mix of

Medicare beneficiaries vs. other beneficiaries. Medicare controls a

growing portion of orthopedic practices' business, with 6.2 percent more

charges over the previous year. Another challenge is accounts receivable

(A/R), which increased 3.2 percent -- indicating that practices are

having more difficulty collecting on billings. Total median medical

revenue did rise 6.6 percent, despite double-digit cost increases.

When recounting revenue and operating costs, size matters

Median revenue after operating costs per FTE physician is greater in

mid- to large-size practices, according to the MGMA's report. Gross

charges and revenue per FTE physician increase with group size, as do

total operating costs.

For practices with three to six FTE physicians, per FTE physician:

·Median total medical revenue was $849,744;

·Median total operating cost was $390,960; and

·Median revenue after operating cost was $435,497.

For practices with seven to 12 FTE physicians:

·Median total medical revenue was $952,898;

·Median total operating cost was $399,283; and

·Median revenue after operating cost was $505,927.

For practices with 13 or more FTE physicians:

·Median total medical revenue was $1,029,095;

·Median total operating cost was $478,599; and

·Median revenue after operating cost was $504,250.

"As we've seen in other cost survey data, larger groups of physicians

-- including orthopedists -- seem to benefit from economies of scale,"

said Orr.

Median revenue after operating cost per FTE physician for ancillary

services was:

·$136,768 for physical therapy;

·$69,858 for diagnostic radiology (X-ray);

·$60,336 for magnetic resonance imaging (MRI); and

·$33,254 for occupational therapy.

"Revenue from ancillary services is the only thing keeping some

practices from going under," Orr said.

The net response rate to MGMA's two-year-old orthopedic cost survey

increased 24 percent, from 111 respondents in 2001 to 138 respondents in

2002.

The MGMA Cost Survey for Orthopedic Practices: 2003 Report Based on

2002 Data features information from more than 130 orthopedic practices.

The report includes exhaustive data on operating costs, staffing,

revenue performance, ambulatory surgery center (ASC) ownership, and

specific ancillary activity, volume, revenues and costs for key

orthopedic services.

MGMA, founded in 1926, is the nation's principal voice for medical

group practice. MGMA's 19,000 members manage and lead more than 11,000

organizations in which more than 220,000 physicians practice. MGMA's

core purpose is to improve the effectiveness of medical group practices

and the knowledge and skills of the individuals who manage and lead

them. MGMA headquarters are in Englewood, Colo.

Source: MGMA