UNITING PHYSICIANS & PATIENTS AS A VOICE IN HEALTH CARE
The principal data sources for this report are the 1996 HMO reports to the Minnesota Department of Health (DOH). These reports contain data on total revenues and expenditures. Total revenue includes revenues from all sources, including premium payments and payments by tax-financed government programs. The HMOs are required to report their expenditures using expenditure categories used by DOH which were developed by the National Association of Insurance Commissioners(8). Some HMOs break their expenditures down more finely than others. For example, mental health and chemical dependency services, and funds withheld from physicians, are reported separately by some HMOs and not by others.
Percentages for hospital administration costs have been estimated, based on statistics provided by the Forecasting/Data Unit of the Department of Health of the State of Minnesota(9). The average administration costs of all Minnesota hospitals was reported to be 12.5% of total revenues. This percentage was applied to the percentages of total costs of the individual HMOs which they reported as being paid to hospitals.
Percentages for administration costs of physician clinics have been estimated by a similar procedure. The data for administration costs of physician clinics was extracted from data from the Medical Group Management Association(10). The information used for the accompanying charts was computed from data contained in a table in that publication entitled, "Operating Cost as a Percent of Total Net Medical Revenue by Geographic Section for Multispecialty Practices," using median data for the Midwest Section (which includes Minnesota practices).
Salaries, benefits, and payroll taxes for administrative personnel were counted in arriving at the percentage representing physician administration costs. In addition, administration supplies and expenses and information services costs were added. Other operation costs, such as rent, depreciation, property taxes, outside legal and accounting, repairs and maintenance, etc. were included as "physician office costs". The costs used represented 14.7% of net revenues of the physician clinics represented in the survey. By applying this percentage to the amounts reported by the HMOs as paid for physician services, the resulting percentages used in the accompanying charts were derived.