Professional services
Medical Practice Overhead Calculator
Totals practice overhead, where the share of revenue it consumes is the headline figure.
Result
Overhead is what the business costs whether or not you work. Wages for people who are on jobs belong in job cost instead, and counting them here overstates overhead and underprices everything.
Get a Free Business AuditHow the calculation works
The monthly total of what the practice costs regardless of visit volume: premises, non-provider salaries, malpractice and other insurance, equipment, electronic records and practice management systems, billing and supplies. Divided by revenue it gives the overhead rate, and divided by visits the overhead each visit must carry.
What moves the number
- Non-provider salaries, usually the largest line.
- Premises and equipment.
- Electronic records and practice management systems.
- Malpractice insurance, which varies by specialty.
Where this one goes wrong
Provider compensation is not overhead, and whether it sits above or below the line changes the overhead rate dramatically, which is why published overhead percentages for practices should be read with the convention checked. Within the practice, the rate falls as visits rise against a largely fixed base, so a high overhead rate is often a volume problem rather than a cost one, and cutting costs when the real issue is unfilled capacity makes the practice worse at filling it.
Before you quote
- State whether provider compensation is in overhead.
- Check whether a high rate is a volume problem.
- Divide by visits as well as by revenue.
Questions
About this calculator
Is provider compensation part of overhead?
Conventionally no, and whether it is included changes the rate dramatically. That is why published overhead percentages for practices should be read with the convention checked, since the difference between conventions exceeds any plausible performance gap.
My overhead rate is high. What does that mean?
Often that volume is low rather than that costs are excessive, since the base is largely fixed and the rate falls as visits rise. Cutting costs when the real problem is unfilled capacity usually makes the practice less able to fill it.
What is the largest overhead line?
Non-provider salaries in most practices, followed by premises. Both are difficult to move quickly, which is why the practical lever on the overhead rate is usually throughput rather than cost reduction.
The formula
overhead rate = monthly overhead / monthly revenue
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How to use this calculator
- Premises per month ($). Enter your own figure; the page starts at $1,800.
- Office and management wages ($). Enter your own figure; the page starts at $5,200.
- Equipment service and leases ($). Enter your own figure; the page starts at $2,400.
- Insurance and licensing ($). Enter your own figure; the page starts at $900.
- Software, phones and internet ($). Enter your own figure; the page starts at $450.
- Marketing and advertising ($). Enter your own figure; the page starts at $1,500.
The result updates as you type, so you can try a figure, see what it does to overhead per month, and change it back. Nothing you enter is sent anywhere or saved.
A worked example
These are the figures the calculator opens with. Every number in the results column below is produced by the same calculation the page runs, so you can follow it through before putting your own figures in.
What goes in
| Input | Value |
|---|---|
| Premises per month | $1,800 |
| Office and management wages | $5,200 |
| Equipment service and leases | $2,400 |
| Insurance and licensing | $900 |
| Software, phones and internet | $450 |
| Marketing and advertising | $1,500 |
| Everything else | $700 |
| Monthly revenue | $68,000 |
What comes out
| Result | Value |
|---|---|
| Overhead per month main result | $12,950 |
| Overhead per year | $155,400 |
| Overhead rate | 19.0% |
| Cost of opening the doors | $588.64 |
Overhead runs $12,950 a month, 19.0% of revenue. Every working day costs $588.64 before anybody turns a wheel.
How sensitive the answer is
Holding everything else steady and changing only premises per month, this is what happens to overhead per month. It is worth knowing which of your inputs the answer actually hinges on, and which barely move it.
| Premises per month ($) | Overhead per month |
|---|---|
| $900 | $12,050 |
| $1,350 | $12,500 |
| $1,800 example above | $12,950 |
| $2,700 | $13,850 |
| $3,600 | $14,750 |
Every other input is held at the example value while this one changes, which is not how a real job behaves. Treat it as a guide to which number matters most, not as five separate quotes.
What each figure means
- Premises per month ($)
- A money amount, starting at $1,800.
- Office and management wages ($)
- A money amount, starting at $5,200.
- Equipment service and leases ($)
- A money amount, starting at $2,400.
- Insurance and licensing ($)
- A money amount, starting at $900.
- Software, phones and internet ($)
- A money amount, starting at $450.
- Marketing and advertising ($)
- A money amount, starting at $1,500.
- Everything else ($)
- A money amount, starting at $700.
- Monthly revenue ($)
- A money amount, starting at $68,000.
What the results tell you
| Result | What it is |
|---|---|
| Overhead per month | The headline result. A money figure. |
| Overhead per year | A money figure. |
| Overhead rate | A percentage. |
| Cost of opening the doors | A money figure. |
Estimating is the easy part
The jobs you never hear about cost more than the ones you mis-measure. BDEVY builds the marketing, systems and automation that bring them in.