How do your medical practice costs stack up?

Hospital-owned medical practices are working hard to rein in costs during this time of intense change and payment uncertainty, reveals a new survey from MGMA-ACMPE (formerly the Medical Group Management Association).

Latest figures: Total operating costs per full-time equivalent (FTE) physician increased in both hospital/IDS-owned and physician-owned multispecialty practices, according to the report, the MGMA Cost Survey for Multispecialty Practices: 2012 Report Based on 2011 Data. Hospital/IDS-owned multispecialty medical practices reported $387,586 in total operating costs per FTE physician, an increase of 6.45% from last year. Physician-owned multispecialty practices reported $528,182 in total operating costs per FTE physician, an increase of 1.27% since 2010.

Drivers of operating costs include salaries of business and clinical staff, supplies, drug costs, IT, and occupancy. The trouble is, not much on this list is controllable. Salaries are on the rise due to increased demand and shortage of clinical staff as well as senior-level administrators who can manage a medical practice. Building and occupancy costs are fixed. General operating costs (everything except support staff costs) are up about 8% since 2007, while IT costs have skyrocketed 46% since then.

What to do: Traditional cost-cutting measures, such as reductions or freezes in headcount or capital spending, will no longer do the trick for healthcare providers in this new landscape. And IT spending is generally not the place to cut because it helps meet the needs of patients and increases operating efficiency. Instead, look to the redesign of patient care delivery and back-office processes, as well as quality-of-care initiatives, to achieve significant and sustainable cost reduction and to compete in the post-reform world.

Stay tuned to this blog and to future issues of the Healthcare Value Wire for ways hospitals are meeting the complex challenge of long-term cost reduction.