The health care industry represents over 17% (1/6) of our Gross National Product in the United States, yet is one of the most complex and controversial businesses to operate.
Overhead for a physician practice has increased substantially over the past 15 years. With reimbursements dropping, malpractice costs rising and salaries for employees increasing, the overhead percentage increase for a physician practice has outpaced the consumer price index significantly. This means that physicians are working the same or harder for substantially less money than they did 15 years ago.
Most physicians believe that their practice’s overhead is somewhere between 40% and 50% of their charges. The truth is that in today’s medical practices, it is actually between 60% and 70%.
The reasons? In the past 15 years, health insurance costs for employees rose over 200%. Reimbursements from third-party payers decreased substantially. Technology has become much more expensive. Documentation for malpractice purposes has caused physicians to do more paperwork. The billing process to third-party payers has become much more complicated. Physicians have been forced to hire more staff. With all of these changes, some physicians have taken a 50% cut in pay – or more.