Physician-owned practices crack down on costs

Physician-owned practices are keeping a tight rein on costs, with the amount of money spent per doctor in operating expenses going up only 1.3% from 2010 to 2011, according to data released Dec. 12, 2012, by MGMA-ACMPE.

“For the private practice physician, keeping costs down is a matter of survival,” said Kenneth Hertz, principal with MGMA Health Care Consulting Group. “Private practices have to be extraordinarily vigilant about costs.”

Analysts with MGMA-ACMPE, an organization of medical practice managers, collected data on physician salaries, support staff costs and other expenses from 2,100 multispeciality groups with 46,800 doctors. Physician-owned practices spent $528,182 per doctor in 2011.

Researchers believe physician-owned groups were able to hold down cost growth because those who run them say they have a pressing need to do so.

“It's just very expensive to practice given the current environment,” said Shawn Moyer, MD, a solo family physician who owns Pinchot Family Medicine in Warrington, Pa. “I have to make sure my costs are low. Even paper clips are not something you can buy willy-nilly.”

Technology trends also may have helped physician-owned practices keep a lid on costs. For example, Dr. Moyer has been able to hold down his rent primarily because he has an electronic health record that eliminates the need to have space for storing paper charts.

In addition, the emergence of social media may have played a role. The MGMA-ACMPE report found a decline in marketing and promotion expenses. Practice management consultants say this is a result of physicians shifting from paying for radio and print advertising to various social media outlets. These online promotion efforts take staff time, but the cash outlay is generally minimal.

“Billboards and other forms of traditional advertising are typically pretty costly,” Hertz said. “The nature of communication is changing, and practices are increasingly savvy in the use of social media.”

Meanwhile, MGMA-ACMPE said practices owned by hospitals and integrated delivery systems spent $387,586 per doctor in 2011. Consultants say overall operating costs for physicians at hospital-owned practices are lower, in part, because of economies of scale. Operating costs per doctor went up 6.5% at practices run by hospitals or integrated delivery systems.

“The private practice physician is a small business, and their business costs are going to be a little bit higher,” said Vic Arnold, managing director with Huron Healthcare's physician services division in Chicago. “They don't necessarily have access to the supply and labor contracts that a larger institution has.”

Different accounting strategies that mean costs are attributed in various ways also are playing a role. The cost to a hospital or integrated delivery system to acquire a medical practice is not included in the operating costs tallied by MGMA-ACMPE.