Medical Practice Overhead: What Percentage Is Normal?

Picture an owner who hears at a dinner that a colleague runs at 55% overhead, then goes home worried about their own 62%. Neither number means much yet. One may include the nurse practitioner's pay and the other may not; one may divide by charges, the other by cash. MGMA's June 23, 2026 poll found 84% of medical groups paying more to operate than a year earlier, by about 11% on average among them. The pressure is real. The comparison has to be honest first.

Define medical practice overhead percentage before you compare it

Overhead percentage is a fraction, and every argument about it is really an argument about the top of the fraction. The common practice-level definition: operating expenses, excluding physician compensation and benefits, divided by collections for the same period, times 100.

Divide by collections, not charges: charges reflect your chargemaster, while collections reflect what the work actually brought in. Use the same 12 months on both sides. Then write the definition at the top of the report, so next year's number is built the same way.

What CMS's cost data says

The best free view of how physician practices spend money comes from Medicare. CMS's Medicare Economic Index (MEI) assigns a weight to each part of practice cost, and in the CY 2023 fee schedule final rule CMS published rebased weights built on 2017 data. It has not used the new weights in payment, and for 2027 it proposed to keep the current shares, but the 2017-based figures are its most recent published estimate of the cost structure.

In CMS's 2017-based index, practice expense plus malpractice make up 52.5% of physician practice costs, and non-physician staff compensation alone is 25.5%. That is a cost share, not an overhead ratio: it measures shares of total cost, physician pay included, rather than expense against collections. But it is the closest thing to a public, national answer to "what is normal," and the answer is roughly half.

What MGMA publishes openly

MGMA's DataDive holds the specialty-level overhead benchmarks, behind a paywall. What MGMA publishes openly is direction, plus a few general ranges.

From 2011 to 2024, median total operating cost per FTE physician rose 71.6% in physician-owned multispecialty groups, while consumer prices rose 39.5% (MGMA, October 2025). If your overhead percentage has crept up over the decade, that is the national pattern, not only a management failure. It still has to be managed.

Where the overhead dollar goes

MGMA's June 2025 article on rising costs gave general ranges for the main expense lines. They are not benchmarks, and they line up with the CMS weights above.

MGMA put support staff salaries and benefits at roughly a quarter of total practice revenue, which makes staffing the line that decides most overhead percentages. It is also the line where cutting backfires fastest. A short-staffed front desk produces denials, missed calls, and turnover, and each of those lands on the other side of the fraction.

Why the percentage keeps climbing

Overhead percentage has two moving parts, and lately both move the wrong way. Costs rose about 11% on average for the groups that saw increases in MGMA's June 2026 poll. Revenue did not keep pace for many: in MGMA's June 30, 2026 revenue poll, 47% of groups reported higher year-to-date revenue and 36% reported a decrease (221 responses).

CMS raised the 2026 conversion factor 3.26% for most physicians, to $33.4009, then finalized $32.6286 for 2027, a 2.31% cut, after projecting 2.5% growth in practice costs as measured by the MEI in its July 2026 proposal (CY 2027 final rule, November 2026). MGMA also reports that 80% of medical groups say Medicare pays below their cost to deliver care (MGMA Stat poll, February 24, 2026). A practice whose Medicare-linked revenue falls while costs rise watches its overhead percentage climb with no change in how it is run. The payer side of that is in the payer mix analysis.

One practice, three overhead numbers

To see how much the definition matters, take one invented practice and calculate its overhead three ways. Every figure below is illustrative.

Same practice, same year, a 31-point spread. Version A is the one to track, because it isolates what it costs to run the practice and does not move when you hire an NP or reprice the chargemaster. If you employ NPs or PAs, track their cost separately against the collections they generate, so a good hire does not look like an overhead problem.

What actually moves overhead

Most overhead advice starts with cutting. In a small practice, the bigger lever is usually the bottom of the fraction: money the practice already earned and did not collect.

A dollar of recovered collections lowers the overhead percentage without cutting anyone, which is why revenue-side fixes come before layoffs. Our recommendation: fix front-end denial causes first, because they raise collections and cut rework at the same time. The losses that never show on a P&L are mapped in the three leaks guide, and if you want outside help, every ClinicOps price is published in full.

Track it monthly, the same way

Calculate overhead monthly on a trailing 12-month basis, with the definition fixed. Put one line on the owner dashboard: overhead percentage, trailing 12 months, with last year's figure beside it.

Compare with outside numbers only after your own trend is clean, and only like with like: the same definition, a similar specialty and size, and a similar ownership model. The independent practice benchmark report sets out which comparisons are fair, the physician ownership data shows who is still independent, and the operations budget guide turns overhead lines into next year's plan.

Frequently asked questions