MGMA Reports Varying Financial Stability for Pediatric Medical Group Practices

ENGLEWOOD, Colo. -- The largest pediatric medical group practices report the highest incomes in the first-ever Medical Group Management Association (MGMA) Cost Survey for Pediatric Practices: 2004 Report Based on 2003 Data. The report also indicates that revenue has not kept pace with cost increases, even though pediatric practices have attempted to hold staffing costs steady. Additionally, the report provides sought-after data specific to pediatric practices, such as immunization costs and paperwork processing fees.

Larger practices report better incomes

The MGMA report indicates that practices with nine or more full-time-equivalent (FTE) physicians are most profitable. These practices reported the highest revenue after operating cost as a percent of total medical revenue: $226,489 per FTE physician. Smaller pediatric group practices, especially those with three or fewer FTE physicians, reported the highest cost as a percent of medical revenue: 61.74 percent. These indicators suggest that, unlike larger practices, smaller practices do not benefit from economies of scale and staffing efficiencies.

"Larger pediatric groups often have the ability to negotiate higher rates and realize staffing and other efficiencies because of their size," said Nancy Babbitt, CMPE, MGMA member and practice administrator, Roswell Pediatric Center, PC, in Alpharetta, Ga. "Larger practices can also afford to employ an educated, board-certified administrator. This may help those groups negotiate better rates, benchmark the practice against its peers, run the practice more efficiently and capture more revenue." 

Revenue not keeping pace with cost increases

While incomes vary according to practice size, MGMA's report indicates that overall revenue increases have not kept pace with cost increases for all pediatric practices. Responding organizations experienced a 10.3 percent increase in revenue, coupled with a 12.5 percent increase in total operating cost over five years.

"Malpractice insurance increases and stagnating or decreasing reimbursements are just two of the factors pushing pediatric and primary care groups' margins to untenable lows," Babbitt said. "While some groups are realizing the benefits of adopting technology some are finding these year-over-year increases devastating."

Practices reduce staffing costs

Pediatric practices may be attempting to hold staffing costs steady to offset operating cost increases and slow revenue growth. Responding groups reported a 5.03 percent increase in staffing costs over five years, a 6.23 percent loss in margin (total medical revenue after operating cost) over five years and a 50 percent increase in general operating cost over five years.

Administrative fees for forms

To help offset costs, 16.67 percent of responding pediatric practices report that they charge administrative fees for completion of forms. Of those, 50 percent charge $5 or less per form, 21.43 percent charge $6-$10 per form and 28.57 percent charge $11-$20 per form.

Additionally, more than 80 percent of responding practices indicated that they do not use an electronic medical records (EMR) system. "Many primary care practices realize that technology can enable better performance from practices while they deal with overwhelming and cumbersome administrative burdens and regulation," Babbitt said.

"Now that systems are becoming more affordable, they are easier for smaller practice to adopt. It's starting to become a matter of 'when,' not 'if.'"

Source: MGMA