Margins for medical group practices dropped in 2004, according to a new 2005 cost survey by the Medical Group Management Association. According to the survey, margins for internal medicine single-specialty groups decreased by 5.5 percent to $201,896, and primary care multispecialty groups not owned by hospitals saw a decrease of 3.9 percent to $217,315. Overall, multispecialty groups’ median total operating margin increased by 1.7 percent. For specialty practices, the median total medical revenue after operating costs per FFE physician grew by 5.6 percent to $387,341.

For specialty practices, the median total medical revenue after operating costs per FFE physician grew by 5.6 percent to $387,341. Among other factors, MGMA attributes the decrease in margins for single-specialty groups to the 5.7 increase in median total operating costs per physician and a 4.6 percent increase in average support-staff costs. In addition, professional liability coverage continues to increase at a consistent level for all specialties, with obstetrics and gynecology leading the pack at 5.91 percent of total medical revenue, according to the survey. Since 2003, professional liability costs per full-time physician have increased from 13 percent to 19 percent, MGMA noted.

Hospital-owned multispecialty practices seemed to do better at controlling costs, while nonhospital-owned multispecialty practices seemed to be better revenue generators, MGMA observed. Hospital-owned multispecialty practices’ total operating costs per FTE physician dropped 9.9 percent (to $283,191), while nonhospital–owned multispecialty practices saw theirs grow 3.5 percent (to $392,108). Hospital-owned multispecialty practices’ total medical revenue per FFE physician dropped 5.8 percent (to $439,672), while nonhospital-owned multispecialty practices saw theirs grow 6.3 percent (to $673,258).