Data Mine: Defying gravity — Are medical groups entering an era of increased productivity?

Over the past months, the Data Mine column addressed the problems medical groups are experiencing with increased expenses and limited opportunities to increase payment.  The October 2023 article¹ and the January 2024 article² describe serious problems affecting private and hospital-based medical groups. Fortunately, while some practices are experiencing serious problems, many medical groups are managing to “keep their heads above water” and some are thriving.

While practices have limited ability to increase payment, they can attempt to increase productivity. However, increasing productivity usually means increasing staffing levels, which increases overhead costs. The previous articles described how staffing levels have remained essentially constant, so it appears that practices are finding other ways to defy gravity and improve overall financial performance.

Figure 1 provides a 37-year retrospective look at total medical revenue, total operating cost and total medical revenue after operating cost per full-time-equivalent (FTE) physician for physician-owned multispecialty groups. For a better comparison over time, the financial data are standardized to 2022 dollars using the Consumer Price Index — All Urban Consumers (CPI-U), the most commonly used indicator of inflation. During these 37 years, the CPI-U has almost tripled, as inflation has affected all parts of the economy; by standardizing the historic data to 2022 dollars, the financial information on the graph is comparable over time.