84% of Medical Groups Report Higher Operating Costs in 2026 and Revenue Is Not Keeping Up

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As of October 2026, MGMA data shows that 84% of medical groups reported higher year-to-date operating costs compared with the same period in 2025, while only 47% reported higher revenue. The gap between rising costs and flat revenue is compressing practice margins and forcing more providers to outsource revenue cycle functions like billing, prior authorization, and denial management to control overhead without reducing clinical capacity.

• The cost side: Staffing, supply costs, payer complexity, and administrative burden are all increasing simultaneously. The AMA found that physician practices now complete an average of 40 prior authorizations per week, consuming roughly 13 hours of staff time.
• The revenue side: Payer reimbursement rates have not kept pace. MGMA reported that only 47% of groups saw revenue growth, meaning the majority are absorbing higher costs on the same or lower collections.
• What practices are doing about it: Groups that cannot hire additional staff are turning to outsourced billing partners to handle claims, denials, and prior auth workflows at a lower cost than adding full-time employees.

What the 2026 MGMA Data Shows

The Medical Group Management Association tracks operating costs, staffing, revenue, and operational benchmarks across medical practices nationwide. The 2026 data, cited in an October 16 analysis by HBK CPAs and Advisors, confirms what practice managers have been feeling for months: costs are climbing across nearly every category while revenue growth has stalled for more than half of all groups.

The headline numbers tell the story. Eighty-four percent of medical groups reported higher year-to-date operating costs in 2026 compared to the same period in 2025. Only 47% reported higher revenue. That means more than half of all medical groups are watching their margins shrink with no revenue increase to offset the cost pressure.

The cost drivers are not temporary. Staffing remains the largest expense for most practices, and competition for qualified billing, coding, and front-desk staff continues to push wages higher. Supply costs have increased. Payer requirements have grown more complex, with more documentation, more prior authorization steps, and more denials requiring follow-up. Each of those tasks requires staff time, and staff time is the one resource practices cannot manufacture.

For practice managers evaluating their options, the MGMA data puts the outsourcing question in concrete financial terms. If your costs are rising and your revenue is flat, the only levers available are reducing overhead or increasing collections efficiency. Outsourcing billing addresses both.

How Much Is Prior Authorization Costing Your Practice?

According to the AMA’s 2025 Prior Authorization Survey, released in 2026, physicians and their staff complete an average of 40 prior authorizations per physician per week. That workload consumes approximately 13 hours of physician and staff time weekly. Seventy-four percent of physicians reported that prior authorization denials had increased over the previous five years.

Translate that into dollars. If a medical assistant earning $20 per hour spends half their week on prior authorization follow-up, that is over $500 per week in direct labor cost on a single administrative function for a single physician. Multiply that across a three-provider group and you are looking at $6,000 to $8,000 per month in staff time devoted to chasing approvals, not treating patients.

Across the billing companies in our network, a recurring pattern is that practices do not realize how much prior authorization is actually costing them until they see the numbers broken out. The work is spread across front desk staff, medical assistants, and office managers, so it never shows up as a single line item. But when you add it up, it is often the largest administrative cost after payroll processing itself.

A billing partner that handles prior authorization as part of a full-service RCM engagement absorbs that labor cost at a fraction of what it costs to staff internally. That is one of the clearest cost-saving arguments in outsourced billing right now, and the MGMA data reinforces it.

Why Revenue Is Not Keeping Pace

The cost side of the equation gets most of the attention, but the revenue side is equally important to understand. MGMA’s finding that only 47% of groups reported higher revenue points to several structural pressures that practices cannot solve by seeing more patients.

Commercial payer rate increases have been minimal for most specialties. MGMA separately reported that a majority of medical groups had gone years without a meaningful commercial payer rate increase. When the cost of delivering care rises by 5 to 8% annually but reimbursement increases by 1 to 2%, the margin compression is predictable and unavoidable.

Medicare reimbursement continues to face downward pressure. CMS has proposed or finalized payment reductions in multiple fee schedules for 2027, and the conversion factor adjustments in the Physician Fee Schedule have not kept pace with practice cost inflation. Practices that depend heavily on Medicare revenue are seeing the gap widen faster than those with a diversified payer mix.

Denials compound the problem. Every denied claim is revenue delayed or lost entirely. Practices with high denial rates are leaving money on the table that a dedicated billing team would recover. You can see how paper-based vs. electronic billing systems affect denial rates and collection speed in our comparison guide.

Does Outsourcing Billing Actually Reduce Practice Costs?

Yes. Outsourced medical billing typically costs 4% to 10% of collections, while in-house billing departments often run 8% to 14% of collections when you account for salaries, benefits, software licenses, clearinghouse fees, training, and turnover costs. The savings come from three areas: reduced headcount for billing-specific roles, lower denial rates from specialized expertise, and faster payment cycles from dedicated follow-up.

One question we hear constantly from practice managers is whether outsourcing actually saves money or just moves the cost to a different line item. The answer depends on the practice’s current cost structure, but for most groups under 10 providers, the math favors outsourcing because a billing company spreads its fixed costs across dozens or hundreds of clients. Your practice gets the benefit of dedicated staff, current coding knowledge, and payer-specific expertise without carrying the full salary and benefits load.

The MGMA cost data makes this calculation more urgent in 2026. When 84% of groups report higher costs and the majority are not seeing revenue growth, the practices that hold their margins are the ones that find ways to deliver the same output at lower cost. Billing is one of the few areas where outsourcing can deliver measurable savings without affecting patient care quality.

In our experience matching providers with billing partners, the groups that see the strongest results are the ones that outsource the full revenue cycle, not just claim submission. When your billing partner handles eligibility verification, charge entry, claim follow-up, denial management, prior authorization, and patient collections, the efficiency gains compound across every step.

What to Evaluate Before Outsourcing

If the MGMA data describes your practice, here is how to evaluate whether outsourcing billing is the right move and what to look for in a partner.

1. Calculate your true in-house billing cost. Add salaries, benefits, software, clearinghouse fees, training, and turnover costs for everyone involved in billing. Divide by total collections. If the result exceeds 8% of collections, outsourcing is likely cheaper.
2. Measure your denial rate. If more than 5% of your claims are denied on first submission, a billing company with specialty-specific expertise can likely improve that number and recover revenue you are currently losing.
3. Track your days in accounts receivable. If your average A/R exceeds 40 days, your follow-up process has gaps that a dedicated billing team can close. Every day beyond 40 represents cash sitting uncollected.
4. Assess your prior authorization burden. Count the hours your staff spends on prior auth weekly. If it matches the AMA average of 13 hours per physician, that labor cost alone may justify bringing in a partner.
5. Check your payer mix. Practices with a heavy Medicare or Medicaid payer mix face more complex billing rules and tighter reimbursement. A billing partner with experience in government payers can navigate those requirements more efficiently than generalist staff.
6. Verify credentialing is current. Billing problems often start with credentialing gaps. Make sure your providers are properly credentialed with every payer they bill. Our guide on what to do when a physician is not credentialed covers the steps to close gaps before they cause claim rejections.

In-House vs. Outsourced Billing Costs

The cost comparison between in-house and outsourced billing is where most practice managers make their decision. Here is how the two models compare across the categories that drive total cost.

For practices evaluating specific CPT code reimbursement and billing guidelines, the complexity of staying current on coding changes is another hidden cost that outsourced billing absorbs.

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