Physician overhead rates can be a mystery to non-financial doctors. Although some doctors are very good at tracking numbers, many have no idea of what the ideal or average physician overhead rates are.
According to Samuel Catanese writing for Healthcare News “Most physicians believe that their practice’s overhead is somewhere between 40% and 50% of their charges. The truth is that in today’s medical practices, it is actually between 60% and 70%.”
Surveys and Averages can be misleading
Specific date is challenging to come by. Some surveys show that a typical Primary Care medical office will have a total overhead expenses of 55% or higher. For surgeons and specialists this percentage is typically between 49-51%. The median overhead for primary care practices is 59.5%, according to MGMA reports..
If you are looking to better understand physician overhead rates, it is best to start with your own practice. This is because every situation is unique, and tracking against averages can be misleading.
What you measure, you can control
One of the most important parts of managing physician overhead rates is tracking your progress. Several times each year, take time to go through a quarterly (or ideally monthly) review of overhead expenses. It only takes an hour or so, and gives you a good sense of financial control.
Some of the key categories of physician overhead rates are:
– Total support staff cost (employee wage + benefits)
– Information services (EHR, billing system, telephone system, etc.)
– Medical and surgical supplies
– Clinical laboratory
– Facility expenses (building rent or mortgage)
– Furniture and equipment (typically leased or paid off via a loan)
– Administrative supplies and services (postage, forms, etc.)
– Professional liability insurance (malpractice insurance)
– Other insurance premiums (for your practice)
– Outside professional fees (accountant, lawyer, consultant)
– Promotion and marketing
– Other ancillary services (eg. cleaning expenses)
– Miscellaneous operating cost
The larger expenses should be staff, facility and medical supplies. Loans should have a finite period and will eventually mature. Tracking these expenses helps you know where your money is going.
Knowing these numbers and comparing them year over year is a great way to beat the averages when it comes to physician overheard rates.