Medical groups nationwide lost money last year, and they can expect to lose even more this year due to cuts in Medicare reimbursements, according to a study for the American Medical Group Association. The AMGA statement said the study confirmed that physician groups are experiencing significant losses in the midst of an increasingly competitive and regulated environment.
The association's 2002 Medical Group Financial Operations Survey, released in August, found that, on average, groups lost $16,840 per physician in 2001, slightly better than the $17,938 loss per physician logged the year before.
The average is dragged down by groups that lost a great deal of money and perhaps went out of business, so many people also consult the median loss or gain, according to Shawn Schwartz, a researcher for RSM McGladrey in Bloomington, Minn., who compiled the survey for the AMGA.
But the median income, he reports, also edged into negative territory last year, with the group at the midpoint of those surveyed reporting a loss of $43 compared with breaking even in 2000. Primary care groups incurred the biggest losses, but the survey does not reveal what caused the losses.
The AMGA survey generated responses from 213 medical groups, representing more than 27,180 physicians, and it included groups outside of the AMGA, the association reported.
Schwartz says some money-losing practices are quite literally "living on borrowed time," taking out loans, while others are subsidiaries of larger organizations, such as hospitals, which may be subsidizing them.
He says losses likely will get worse this year with a 5.4% cut in Medicare reimbursements, and more cuts are expected next year if the Senate does not act this fall to avert them.
Dave Gans, director of practice management resources at Medical Group Management Association, agrees that finances appear to be tightening for groups but adds that MGMA's comparable survey has not been released yet.
Until he looks more closely at the data, Gans says he cannot tell if the losses are due to lost income, such as reimbursement cuts, or higher expenses, such as higher equipment costs or increasing malpractice premiums.
Gans says groups usually cope with the losses by cutting doctors' reimbursements, although he added that according to MGMA figures, reimbursements were still rising as recently as 2000.
Another option is increasing revenues by working longer hours, he says, and MGMA data show that "working harder has become a common response."
Meanwhile, an MGMA survey released in August found that physicians were working harder last year to achieve smaller increases in compensation.
According to MGMA's Physician Compensation and Production Survey, the productivity of primary care physicians as measured in median gross charges rose 11% last year, compared with 0.4% in 2000. But their compensation rose just 1.2%, compared with a 2.3% in 2000.