What is a good overhead ratio for medical practices?
Overhead ratio is total operating expenses (excluding owner compensation) divided by collections, expressed as a percentage.
Quick answer
A good overhead ratio is 55 to 65 percent of collections for primary care, 50 to 60 percent for most specialties, and 60 to 72 percent for general dentistry, per MGMA Cost Survey data.
The detail
Overhead ratios vary by specialty because of staffing intensity, supply consumption, and procedure mix. MGMA Cost Survey medians: primary care 55 to 65 percent, internal medicine 58 to 65 percent, orthopedics and dermatology 50 to 58 percent, cardiology 50 to 56 percent, OB/GYN 55 to 62 percent. Dental: general dentistry 60 to 72 percent, orthodontics 50 to 58 percent, oral surgery 55 to 62 percent. Physical therapy: 70 to 80 percent because the staff-to-revenue ratio is structurally higher. The four categories that drive most overhead variance are staff cost (25 to 35 percent of collections), occupancy (4 to 8 percent), medical and office supplies (3 to 8 percent), and external services like billing and lab (5 to 12 percent). A 5 percentage point reduction in overhead on a $5M practice is $250K of additional owner profit.
MGMA Cost Survey is the industry standard source for specialty-specific overhead benchmarks.
Source: MGMA Cost and Revenue Data
Staff cost typically represents 50 to 60 percent of total overhead in outpatient clinics.
Source: MGMA Cost Survey
Occupancy cost should stay under 8 percent of collections; over 10 percent indicates lease or footprint issues.
Source: MGMA practice operations
What this means for clinic owners
From Sorso
Compare your overhead category by category to the specialty median, not in total. Total overhead can mask the fact that your staff cost is fine but your supplies are out of control. The line-item view is where the actionable findings live.
Related questions
What is the average cost per patient encounter?
Average cost per patient encounter ranges from $80 to $250 for primary care, $150 to $400 for specialty care, and $30 to $90 for physical therapy visits, depending on payer mix and overhead structure.
What is a good profit margin for a dental practice?
A healthy general dental practice runs 35 to 45 percent owner profit margin (pre-tax, including owner comp), with normalized EBITDA margin of 18 to 28 percent after market-rate clinical and management compensation.
What is the average revenue per provider?
Average revenue per provider ranges from $400,000 to $1.2M annually depending on specialty, with primary care typically $500K to $750K, specialty care $700K to $1.5M, and procedural specialties exceeding $2M.
What is a good staff-to-provider ratio?
A good staff-to-provider ratio is 3.5 to 5.5 FTE staff per FTE provider for most outpatient specialties, with primary care typically 4 to 5, specialty care 3.5 to 4.5, and procedural specialties 5 to 7.
Sources
Founder of Sorso. 19 years in corporate finance. Managed a $450M loan portfolio before building a fractional CFO firm exclusively for healthcare clinics.
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