Medical group practices that are owned by hospitals or integrated delivery systems (IDS), or are just affiliated with them, are no more immune to cost increases and pressure on payment rates than are their physician-owned practice counterparts. New data indicate that total operating costs per full-time equivalent (FTE) physician in IDS medical group practices increased from $272,454 in 2001 to $295,417 in 2002, while total medical revenue increased from $415,900 to $434,498 during the same period.

In contrast, multispecialty physician-owned practices did slightly better. Total operating costs grew by 5.5 percent and total medical revenue grew by 6.3 percent, according to the Medical Group Management Association's Cost Survey for Integrated Delivery System Practices: 2003 Report Based on 2002 Data

The physician-owned practices probably have a more diverse specialty mix than the hospitals. Hospital groups tend to be primarily comprised of primary care physicians, while the physician groups may have an array of physician specialties that enjoy higher margins. Other factors that influence these outcomes in physician-owned groups include more aggressive cost containment, greater provider productivity, and the incentive of ownership.

"Practices, whether they are physician-owned or hospital-affiliated, are likely going to be more aggressive in negotiating private reimbursement in the future; that includes the hospitals that may have accepted lower outpatient reimbursement to maintain inpatient reimbursement levels," says Dan Stech, director of survey operations at MGMA.

Costs outpace revenue in integrated delivery systems


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