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MGMA: IT Costs for Healthcare Organizations Continue to Rise

August 10, 2016
by Rajiv Leventhal
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Since 2009, technology costs at physician-owned multispecialty practices have increased by more than 40 percent

According to new data from the Englewood, Col.-based Medical Group Management Association (MGMA), physician-owned multispecialty practices spent more than $32,500 per full-time physician on information technology equipment, staff, maintenance, and other related expenses in 2015.

The findings come from the 2016 MGMA Cost and Revenue Report, a widely-used cost survey and benchmarking tool for healthcare organizations in the U.S. Since 2009, technology costs at physician-owned multispecialty practices have increased by more than 40 percent, the MGMA data shows, with the largest increase in technology costs occurred between 2010 and 2011, corresponding to implementation of the 2009 Health Information Technology for Economic and Clinical Health (HITECH) Act.

Indeed, the HITECH incentives led to a significant increase in the number of organizations adopting electronic health record (EHR) systems. However, these incentives tapered down significantly after 2011, requiring practices to shoulder a larger percentage of the cost to upgrade and maintain the technology.

Furthermore, the growing adoption and complexity of healthcare IT may have also contributed to the growing IT staff expenses practices have experienced in recent years. Physician-owned multispecialty practices have seen steady year-over-year increases in IT staff expenses, which have escalated by nearly 47 percent per full-time physician since 2009. Increased staff costs suggest that larger investments in technology have yet to result in significant administrative efficiencies for practices.

Other trends in the healthcare industry may have also contributed to increased technology costs. For example, many practices have invested in online patient portals that allow patients to view their personal health information, make payments, or schedule appointments online, among other functions. More than 50 percent of nearly 850 respondents to a recent MGMA Stat poll—a real-time text-based polling initiative—reported that patients can request or make appointments via their practice’s patient portal.

What’s more, total operating costs are growing throughout the healthcare industry, putting greater pressure on practices as they move toward providing value-based care. Physician-owned multispecialty practices reported that total operating costs increased by nearly 15 percent per full-time physician in 2015, according to the new MGMA data, outpacing the more than 10 percent increase in total revenue these practices enjoyed last year.

Other noteworthy nuggets from the report include:

•             Physician-owned multispecialty practices that are part of an accountable care organization (ACO) enjoyed lower costs and higher total medical revenue after operating costs last year than in 2014.

•             Examining the payer mix for multispecialty groups with both primary and specialty care in 2015, Medicare accounted for a nearly identical share of charges—roughly 33 percent—at both physician-owned and hospital-owned practices. However, hospital-owned practices reported that Medicaid represented 14 percent of charges last year, which is more than twice the nearly 7 percent reported by physician-owned groups.

•             Physician-owned specialties reported having a higher total number of full-time support staff on payroll—including personnel who oversee business operations, the front office, and clinical support—than their hospital-owned counterparts did in 2015. However, primary care specialties at both physician and hospital-owned practices reported a small decline in total support staff throughout the past two years, while nonsurgical and surgical specialties reported support staff increases over that period.

“While technology plays a crucial role in helping healthcare organizations evolve to provide higher-quality, value-based care, this transition is becoming increasingly expensive,” Halee Fischer-Wright, president and CEO of the Medical Group Management Association, said in a statement. “We remain concerned that far too much of a practice’s IT investment is tied directly to complying with the ever-increasing number of federal requirements, rather than to providing better patient care. Unless we see significant changes in the final MIPS/APM rule, practice IT costs will continue to rise without a corresponding improvement in the care delivery process.”

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