MGMA: Cardiology costs outpacing revenue

Cardiologists blame increasing expenses on investments in technology and higher staff salaries, although they hope these investments will pay off down the road.

By Mike Norbut, amednews staff. June 16, 2003.

Cardiology costs are rising faster than revenues, according to one study, a disturbing trend physicians attributed primarily to investments in technology and answering salary demands of more experienced staff.

And this was calculated before Medicare and Medicaid pay cuts and hikes in liability insurance premiums became a reality over the last two years.

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The median total operating cost per full-time cardiologist jumped 15.8% between 2000 and 2001, from $364,856 to $422,659, according to the Medical Group Management Assn.'s 2002 Cost Survey for Cardiovascular/Thoracic Surgery and Cardiology Practices.

Meanwhile, medical revenue per physician only rose about 6.2%, from $847,643 in 2000 to $899,919 in 2001, according to the report.

Some practices see the trend continuing as well. For example, the 25-physician North Ohio Heart Center in Lorain, Ohio, saw its per-physician overhead costs increase from about $580,000 in 2001 to $641,000 last year, said cardiologist John Schaeffer, MD, president of the group and a Tri-Chair of the American College of Cardiology's Advocacy Committee.

Cardiologists' costs were 15.8% more in 2001 than in 2000; revenue rose 6.2%.

"You can't have numbers happen like this all the time," Dr. Schaeffer said. "Your bottom line has to at least break even. Now, most of us are trying to figure out how to work harder, longer, and more efficiently, but there's always an end to that," he said.

Other specialties studied by MGMA showed revenues outpacing costs. For example, primary care physicians saw revenues increase 4.9%, while costs only went up 1.3%.

But survey data were collected before physicians started to face the full-fledged crisis of rising liability insurance premiums and before alterations to the Medicare payment formula adversely affected reimbursement for many physicians.

Also, the survey does not detail how many extra hours a practice's physicians worked; past MGMA surveys have found physicians working longer hours just to keep revenue stable. And any greater increase in revenue than costs goes against prevailing trends -- in the 1990s, the MGMA has said, every specialty found costs going up faster than revenue.

Reached their maximum

Medical technology contributed to the dramatic cost increases many cardiology practices saw, said Dan Stech, MGMA's director of survey operations.

Many cardiologists who are MGMA members have said they already have reached their maximum in terms of patient care, so they can't work any harder, Stech said. Because cardiologists see many elderly patients, they are particularly affected by declines in Medicare reimbursements, and even if they find alternative revenue streams, the trend of costs outpacing revenues could continue, Stech said.

Primary care physicians' pay increased 4.9% between 2000 and 2001; costs went up 1.3%.

"Not only are we anticipating that the decline in reimbursement is going to cut into revenue after operating costs, but we also think it may start cutting into physician compensation in the future as well," Stech said.

Cardiologists are finding new revenue streams by offering more tests and outpatient procedures in their offices, but the additional equipment also increases costs, physicians said.

"There are significant costs for the initial investment, and they demand experienced personnel to run the equipment," said Paul Phillips, MD, a cardiologist with Clearwater Cardiovascular and Interventional Consultants, 16-physician group in Clearwater, Fla. "We're making continual upgrades. There's nothing more than five years old."

Years ago, the Clearwater group started offering echocardiogram and nuclear stress tests in its office, and more recently it added an outpatient cardiac catheterization laboratory.

Dr. Phillips said many cardiology practices had instituted similar strategies, but they have required staffing upgrades as a result. Median support staff costs per full-time physician rose from $193,413 in 2000 to $220,108 in 2001, a 13.8% jump, according to MGMA.

Still, the potential for future revenue -- and the public demand -- almost makes offering those tests and paying the associated costs a necessity, physicians said.

"I think that's why you see a lot of cardiologists forming larger groups," Dr. Phillips said. "It's hard to have tests like that available as a single cardiologist."