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Reduced profit margins common for groups in 2002

Surveys show physician practices are struggling under the weight of falling payments from insurers.

By Mike Norbut, AMNews staff. Nov. 3, 2003.

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Increasing costs and declining reimbursements continue to take their toll on medical groups, as many reported losses or reduced profit margins last year, according to two recent national surveys.

Groups participating in the American Medical Group Assn.'s 2003 Medical Group Financial Operations Survey reported an average loss of $3,977 per physician, a result of what officials called continued stress from reduced payments from insurers. The midpoint results -- the figure at which 50% of respondents were above and 50% were below -- showed a profit of $1,455 per physician.

The situation could get worse unless legislators act to reverse the formula that could reduce Medicare payments in 2004, said Donald W. Fisher, PhD, president and CEO of AMGA, which primarily represents large multispecialty practices. With commercial payers often tying their rates to Medicare's, groups could see cuts across the board, he said.

"This is really frightening," Dr. Fisher said. "Very small groups and solo practitioners can restrict access to new Medicare enrollees, but if you're a large group practice, you can't restrict your access. If the payment rate goes down as proposed, they can't lose money on operations for very long."

Even with the strain, however, groups did perform better last year than in 2001, according to the survey. Two years ago, groups reported an average loss of $16,840 per physician and a midpoint loss of $43 per doctor.

Belt-tightening measures and more attention paid to accounts receivables has helped groups climb closer to the break-even mark, Dr. Fisher said. Average net revenue per physician increased from $614,055 in 2001 to $642,346 in 2002, a 4.6% increase, while midpoint net revenue jumped from $560,794 in 2001 to $631,288 in 2002, a 12.6% increase.

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