Doctor Practices, Some Losing $250,000 A Year, Reel From Labor Costs

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Medical groups had a rough 2023 as expenses outpaced revenue gains by more than $250,000 amid high labor costs triggered by healthcare staff shortages, according to the American Medical Group Association (AMGA).

The AMGA 2023 medical group operations and finance survey, which draws data from more than 15,000 providers and 5,700 clinics, paints a picture of medical group practices continuing to try get hold of expenses that are outpacing rising revenues.

“Survey results indicate that ongoing external pressures—such as cost of labor, staffing shortages, CMS [Centers for Medicare and Medicaid Services] fee schedule and regulatory changes —are impacting medical group performance,” said AMGA Consulting Chief Operating Officer Mike Coppola.

System-affiliated groups reported a median loss per physician at more than $249,000 in 2023. While median total revenue per physician increased to $719,901 from $608,639, median total expenses grew even faster, rising past $1 million per physician to $1,036,238 from $905,283.

System-affiliated groups include employed physicians and practices owned by hospitals and large health systems. And labor typically represents 80% of total practice expenses that include physician and staff salaries, Coppola said.

Clinical staff expenses per physician that had fallen from $162,452 in 2020 to $126,792 in 2021 soared above $200,000 in 2023 to $208,316.

To combat this trend, executives who run medical groups are prioritizing their staffing needs while changing medical care and treatment models and moving where they can to automation and other technologies to improve operating efficiencies.

For some practices, the move to more technology to reduce labor costs means an increase in the use of telehealth. “Today’s leaders are continually focused on improving operational efficiencies through more virtual visits, patient self-scheduling, care team redesign, the use of AI to automate and drive process improvements, and other strategies,” Coppola said.

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