Inflation’s growth and the job market have cooled, but that hasn’t translated into a corresponding dip in the expenses that medical groups are paying heading into the second half of 2023.
A July 12, 2023, MGMA Stat poll finds that 96% of medical groups have seen their operating costs increase (89%) or stay the same (7%) compared to 2022, while only 4% report a decrease in those costs versus last year. The poll had 461 applicable responses.
In addition to these broad findings, the poll also found that the average increase in operating costs this year was 12.5%, with the top drivers of those higher costs being higher wages and salaries for labor, increased expenses for supplies and IT.
These trends come as the latest report on U.S. inflation shows that the annual increase in the Consumer Price Index (CPI) dropped to its lowest level in more than two years, hitting 3% in June, down from 4% in May.
Among medical group leaders whose organization held operating costs steady or managed to decrease them versus 2022 levels, they frequently attributed it to:
- Elimination of agency staffing/travel nurses
- Closer budget analysis
- Contract review with suppliers and vendors and either changing vendors or discontinuing unnecessary services
- Consolidation of operations
- Staff reductions
- Eliminating consulting and business travel expenses.
These findings show little positive change for medical groups hoping to rein in expenses, which was a near universal concern last year: A June 21, 2022, MGMA Stat poll found that 90% of medical groups reported that their costs had risen faster than revenues at that point in 2022, with staffing/labor costs as the most frequently cited area of rising expenses. “Labor is up 30% from a year ago,” one respondent told MGMA at the time. “That has turned our margin negative.”
Outside of the medical group space, hospitals face their own cash crunches, as reported by Healthcare Finance, with a recent Deloitte study suggesting that more than three out of four (76%) of healthcare respondents would have their 2023 strategies impacted by inflation and affordability.
Benchmarking for the inflation era
While the worst of the recent surge in inflation and consumer prices occurred in 2022, a rise in operating costs — which include total support staff cost as well as total general operating expenses — was already a concern last year for certain practices regardless of ownership, as detailed by the MGMA DataDive Cost and Revenue data set:
- Physician-owned primary care and nonsurgical specialty practices experienced a boost in operating costs from 2020 to 2021. The decrease for surgical practices may be attributed to periods in which elective surgeries were stopped or largely held back due to public health restrictions amid COVID-19 surges.
- Hospital-owned practices saw some of the most significant jumps in operating costs per FTE physician from 2020 to 2021, while hospital-owned primary care practices saw a nearly 11% decline year over year.
Watch the MGMA Insights newsletter toward the end of July for the release of the 2023 MGMA DataDive Cost and Revenue summary data report, highlighting key benchmarks from the new data set and trends revealed by our industry-leading surveys.
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