Published 7/1/2007
Steven E. Fisher, MBA

Orthopaedic revenues and expenses keep increasing

MGMA 2006 Cost Survey provides a benchmark for your practice

Every year, the Medical Group Management Association (MGMA) conducts a survey of orthopaedic group practices. Information is collected on a wide array of subjects, including gross charges, receipts, relative value units (RVUs) per physician, expenses, patients per physician, accounts receivable, and so forth. The results are interesting in and of themselves; they are even more interesting when looked at over time.

Key results
Following are some highlights from the 2006 Cost Survey for Orthopaedic Practices, based on 2005 data, the most recent information available. The report is based on 106 usable responses from orthopaedic practices throughout the country. Responding groups had a mean of 11.33 physicians.

Revenues: The mean total medical revenue per full-time equivalent (FTE) physician in the 2006 survey was $1,166,190, compared to $1,071,570 in the 2005 survey and $1,055,954 in the 2004 survey (Table 1).

Patients and procedures: In the 2006 survey, the mean number of patients seen per doctor was 1,911, compared to 1,887 in 2005 and 1,878 in 2004. Medicare patients continue to account for approximately one in four orthopaedic patients: 26.92 percent in 2006 versus 26.29 percent in 2005. Orthopaedic surgeons are continuing to perform approximately the same number of procedures: 9,059 per FTE physician in the 2006 survey versus 9,031 in the 2004 survey.

Expenses: Expenses per FTE physician have been gradually increasing in the past three years: $510,349 in the 2006 survey; $495,495 in 2005; and $489,329 in 2004 (Table 1). Thus, assuming the survey results can be extrapolated, the average orthopaedist’s net income actually increased slightly during the past three years: from $567,166 in 2004 to $576,075 in 2005 and $655,291 in 2006. As a percent of total medical revenue, overhead (total operating cost as a percent of net medical revenue) for orthopaedic practices has been creeping down: from 47.11 percent in 2004 to 46.36 percent in 2005 and 44.97 percent in 2006.

According to the 2006 survey, more than 75 percent of orthopaedists’ operating expenses fall into one of five categories: staff salaries; building/occupancy; employee benefits; medical, surgical, and drug supplies; and professional liability insurance.

Staffing: Total mean support staff per FTE physician has not changed appreciably—5.91 in 2006, 5.75 in 2005, and 5.83 in 2004.

Accounts receivables: Practices’ mean accounts receivable (A/R) per FTE physician have been gradually decreasing since a high of $385,344 in 2004—down to $367,897 in 2005 and just $363,425 in the 2006 survey (Table 1).

What does this mean for you?
The above statistics may or may not be applicable to your orthopaedic office for several reasons. First, the data are based on voluntary responses by MGMA members. Respondents to the survey vary from year to year, and not all respondents answer every survey question. Second, most of the practices included in the survey are medium-sized to large groups; the survey does not even break out practices where there is only one physician provider (approximately one quarter of AAOS members practice by themselves). Third, the statistics cited reflect national averages; there can be significant variations from region to region, as well as within regions (e.g., New York State versus New York City). Finally, individual offices vary greatly in terms of how they operate.

That said, the MGMA 2006 Cost Survey for Orthopaedic Practices does represent an excellent way for orthopaedists to get a sense of how they compare to other offices over a wide range of operating variables. Another very valuable tool for orthopaedic practices whose administrators are members of BONES is to download the results of the BONES revenue and cost survey. See http://aaoe.net/

Members and their administrators are encouraged to contact MGMA and order the complete Cost Survey report. Contact MGMA at (877) 275-6462 or visit their Web site at www.mgma.org

Steven E. Fisher, MBA, is manager of the practice management group at AAOS. He can be reached at (847) 384-4331 or sfisher@aaos.org

Statistics cited in this article are provided with the permission of MGMA.