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Q:

What is the average overhead cost (percentage wise) for an Internal Medicine private practice, on the West Coast ?

A:

Overhead levels for internal medicine practices vary widely. In our experience, operating overhead rates for Internal Medicine practices typically range from the low 50% range to the mid 60% as a percentage of collections. This statistic is impacted by the number of physicians in the group, their production, collection rate and payor mix, and the types of services provided.

According to MGMA’s 2002 Cost Survey, average operating overhead for Internal Medicine practices is 57.59%. However, the survey indicates over 46% of the surveyed practices’ charge volume is for Medicare and Medicaid. If your volume of these payors is lower, and therefore your overall collections are higher, you would expect a lower overhead rate even with comparable costs, by way of example. The National Association of Healthcare Consultants reports average Operating Overhead Expenses for Internists, All Regions, of 58.2%. For the West, they report 55.3%.

The Operating Overhead statistic is based on the operating expenses of the practice excluding any physician related costs such as physician salaries, payroll taxes, fringe benefits including health dental or life insurance, pension plan contributions, education, travel and related expenses. The operating overhead is calculated by dividing these non-physician expenses by the net collections of the practice. See our web site at www.medicalmanagement.com, Online Tools, Overhead Analyzer to assist in calculating your Operating Overhead.


 

Russell B. Still
Executive Vice President

MMA does not provide legal, accounting, or tax advice.  If you need assistance in these areas, we recommend that you consult a qualified professional.  In addition, please note that a client relationship with MMA is not established by the submission of a question to this forum or by the publishing of MMA's response.



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