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Live from MGMA: Feeling the economic crunch

October 21, 2008
by kate
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The attendance at this year’s MGMA conference was somewhat low (2,800 paid attendees and 363 exhibitors), as evidenced by the traffic in the exhibit hall. It was less Long Island Expressway and more Route 81 in central Pennsylvania. From everything I’ve heard, it isn’t a result of waning interest or a decline in the quality of content presented, but rather an upshot of tough economic times

The conference, however, will still go on. Where the crunch is really being felt is in medical group practices across the country. William Jessee, MD, president and CEO of MGMA, presented the following facts at a news conference:

Operating costs are rising faster than revenues. Multispecialty group practices reported a 5.5 percent increase in total revenue but a 6.5 percent increase in operating costs. A large number of single-specialty practices are seeing similar trends, according to MGMA data.

In multispecialty groups, drug supply costs were up a whopping 17 percent in 2007, compounded by a 33 percent increase during the previous year.

Support staff costs are also up; family practices reported a 15.8 percent increase in 2007.

These factors, says Jessee, are putting more pressure on physician practices by diminishing the ability to adopt technology and services that could boost revenues. And on top of that, there is the looming ICD-10 deadline. According to MGMA data, 63.5 percent of practices will have to purchase code-selection software, 95 percent will have to purchase software upgrades or buy all new software, and 83.5 percent don’t believe that public and private health plans would be ready to accept claims with ICD-10 codes by October of 2011.

MGMA study: 10-physician practice would have to spend $285,240 to company with the new federal mandate, 3-physician practices would have to pay $83,290 and 100-physician practices would have to pay more than 2.7 million.

While some believe (and have told me) that healthcare is too insulated to truly feel the impacts of the nation’s current financial situation, others can’t fathom how the industry will be able to escape the wrath of a down economy. While it’s true that there will always be a great demand for healthcare, a poor economy is bound to have some serious effects.

Glen Tullman, CEO of Allscripts, and Tom Cooke, vice president for Eclipsys’ Practice Solutions, both foresee a continued climate of consolidations and acquisitions among health IT providers, particularly EMR companies. The two certainly speak from experience, as Allscripts recently scooped up Misys and Eclipsys has purchased MediNotes. As the economic situation puts pressure on the market, predicts Cooke, the lines will become clearer as to which companies have the resources to invest in EMRs (that garner CCHIT certification) and which do not. The gulf, he says, is getting wider, and it will continue to broaden as the economy struggles.

Perhaps healthcare isn’t as insulated as many believe.

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kate

Kate Huvane, Associate Editor of...