CFOs of Orthopedic Medical Groups Should be Aware Of these 10 Key Financial Statistics
The IRS publishes tax return data each year on the various businesses operating in the United States. In our analysis, we have focused on the financial statistics of orthopedic medical groups, particularly in relation to orthopedic revenue cycle management. These insights aim to assist healthcare CFOs and individuals responsible for the financial aspects of orthopedic practices in creating realistic financial projections and ensuring sound business planning.
Understanding and utilizing this financial data can be instrumental in assessing the performance of orthopedic medical groups and comparing key ratios and percentages against industry averages. By examining your income statement and benchmarking it against the industry average data, you can gain valuable insights into your financial position.
1. Number of Orthopedic Medical Groups as Sole Proprietorships:
In the United States, there are approximately 182,000 orthopedic medical groups organized as sole proprietorships. Our analysis is based on the 2019 IRS tax return data, specifically studying 182,906 companies in the medical office industry.
2. Average Annual Revenue for Orthopedic Medical Groups:
The average annual revenue for sole proprietorship orthopedic medical groups in the U.S. was $150,355.
3. Average Annual Expenses for Orthopedic Medical Groups:
The average annual expenses for sole proprietorship orthopedic medical groups in the U.S. amounted to $82,871. Notably, these expenses represented 55% of the total revenue for a medical office.
4. Average Net Profit Margin for Orthopedic Medical Groups:
Orthopedic medical groups had an average net profit margin of 45%. This metric provides an indication of profitability within the industry.
5. Profit Potential of Owning an Orthopedic Medical Group:
For those considering owning an orthopedic medical group, determining potential earnings requires creating a revenue projection based on the number of physicians in the practice, estimating patient volume per physician, and calculating the total patient spend on medical services per year. Multiplying this projected revenue by the average net profit margin of 45% can yield a forecasted profit as the owner of the business.
6. Top 10 Expenses for Orthopedic Medical Groups:
Analyzing the tax returns of over 182,000 sole proprietors in the medical industry, the following were the ten largest business expenses as a percentage of revenue for orthopedic medical groups:
- Salaries and wages: 13%
- Other business expenses: 13%
- Rent paid on other business property: 4%
- Material Costs – COGS: 4%
- Supplies: 3%
- Contract labor: 2%
- Insurance: 2%
- Taxes paid: 2%
- Depreciation: 1%
- Legal and professional services: 1%
7. Average Labor Cost for Orthopedic Medical Groups:
On average, orthopedic medical groups allocated 13% of their revenue to labor costs. Specific medical office staff positions and associated costs can be further explored for detailed insights.
8. Average Material Cost for Orthopedic Medical Groups:
Orthopedic medical groups typically spent approximately 4% of their annual revenue on material costs. This includes expenses related to disposable supplies used during routine services or material costs for any procedures performed at the office.
9. Average Rent Expense for Orthopedic Medical Groups:
Rent expenses accounted for around 4% of the annual revenue for sole proprietorship orthopedic medical groups.
10. Average Insurance Cost for Orthopedic Medical Groups:
Insurance expenses represented approximately 2% of the annual revenue for sole proprietorship orthopedic medical groups.
It’s important to consider the following details regarding the data:
- The IRS website offers free access to the data analyzed in this study.
- The data encompasses 182,906 sole proprietorships in the medical practice industry for the year 2019, varying in terms of the number of physicians within each business.
- Businesses operating both full-time and part-time are included in the data set.
While the raw numbers for revenue, expenses, and profit should be approached with caution due to potential variations, the percentages provide valuable insights when projecting expenses. Revenue and expenses can vary significantly based on the geographic location of the orthopedic medical group.
The utilization of 2019 data allows for a more normalized representation of the industry as the COVID-19 pandemic disrupted business operations in 2020 and 2021.
By leveraging this financial data, healthcare CFOs and individuals responsible for orthopedic revenue cycle management can gain valuable insights into the financial landscape of orthopedic medical groups and utilize them to inform their financial projections and business strategies.