If you’re running a medical practice, you’re probably feeling the squeeze. Operating costs have surged in 2025 alone, with a majority of medical groups reporting higher expenses than the previous year. Whether you’re considering ways to improve your practice’s financial health or exploring potential sale options down the road, understanding how to reduce your overhead expenses is crucial for your success.
Stark Reality The typical medical practice now spends 60-70% of revenue on overhead costs.
What Is a Reasonable Percentage for Medical Practice Overhead?
A reasonable overhead percentage depends heavily on specialty and practice structure. Primary care practices typically fall in the 55–65% range due to staffing and reimbursement dynamics, while procedural and surgical specialties often achieve 40–50% overhead because higher revenue offsets fixed costs. Larger groups usually maintain more efficient overhead ratios through economies of scale, shared staffing, and stronger purchasing leverage. Physician-owned practices have consistently outperformed hospital-owned systems in controlling practice expenses, proving that overhead reduction is both achievable and sustainable.
| Specialty Type | Typical Overhead |
| Primary Care | 55 – 65 % |
| Internal Medicine | 58 – 68 % |
| Surgical Specialties | 40 – 50 % |
| Dermatology (Medical) | 55 – 65 % |
| Dermatology (Surgical) | 35 – 45 % |
Note Always use specialty-specific benchmarks to define realistic overhead targets.
How Do You Calculate Your Total Practice Overhead Cost?
Your core overhead percentage is calculated by dividing total operating expenses by total revenue. The most meaningful insight comes from separating staffing, facility, and administrative contributors to see where practice expenses exceed specialty norms. Tracking these figures monthly prevents minor issues from becoming revenue-draining trends.
Housekeeping Monthly overhead tracking is the strongest predictor of long-term financial health.
What are Strategies to Reduce Medical Practice Overhead Expenses?
Reducing overhead requires targeted practice management strategies that improve efficiency without limiting clinical capacity.
Optimizing staffing through cross-training and team-based care improves efficiency and reduces physician administrative time, helping control labor costs, which make up 50–60% of total overhead. Outsourcing or right-sizing billing operations lowers errors, decreases denials, and reduces overhead cost while increasing net revenue. Implementing automation and tech tools—like medical scribes and automated revenue cycle workflows—cuts documentation costs and improves patient throughput. Strengthening revenue cycle performance by maintaining high clean claim rates, faster collections, and shorter A/R cycles further reduces overhead expenses.
Growth Tip Every improvement in revenue cycle efficiency directly lowers your overhead percentage.
By combining efficient staffing, streamlined billing, automation, and revenue cycle management, practices can meaningfully reduce their overhead while maintaining high-quality patient care. These strategies also improve overall operations, cash flow, and long-term financial stability.
Reducing your Medical Practice Overhead
Overhead reduction is both a profitability strategy and a valuation strategy. When overhead decreases, EBITDA increases, and because physician practices typically trade at 3–8× EBITDA, every improvement compounds into greater enterprise value.
At SovDoc, we help medical practices optimize their overhead ratios for maximum value, whether you’re planning for long-term growth or preparing for a strategic exit. Our M&A expertise means we understand exactly which efficiency metrics buyers prioritize and how operational improvements translate to enhanced valuations. Contact SovDoc today to develop an overhead reduction plan that maximizes both your current profitability and future opportunities, ultimately increasing your long-term practice value.
