Date: 06/19/2003
Q:
What is the average overhead cost (percentage wise) for an Internal Medicine private practice, on the West Coast ?
A:
Overhead levels for internal medicine practices vary widely. In our experience,
operating overhead rates for Internal Medicine practices typically range from the
low 50% range to the mid 60% as a percentage of collections. This statistic is
impacted by the number of physicians in the group, their production, collection rate
and payor mix, and the types of services provided.
According to MGMA’s 2002 Cost Survey, average operating overhead for
Internal Medicine practices is 57.59%. However, the survey indicates over 46%
of the surveyed practices’ charge volume is for Medicare and Medicaid. If your
volume of these payors is lower, and therefore your overall collections are higher,
you would expect a lower overhead rate even with comparable costs, by way of example.
The National Association of Healthcare Consultants reports average Operating
Overhead Expenses for Internists, All Regions, of 58.2%. For the West, they report 55.3%.
The Operating Overhead statistic is based on the operating expenses of the practice
excluding any physician related costs such as physician salaries, payroll taxes,
fringe benefits including health dental or life insurance, pension plan contributions,
education, travel and related expenses. The operating overhead is calculated by
dividing these non-physician expenses by the net collections of the practice.
See our web site at www.medicalmanagement.com, Online Tools, Overhead Analyzer to
assist in calculating your Operating Overhead.
Russell B. Still
Executive Vice President
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