Orthopedic Practice Overhead Calculator

For a private orthopedic practice, overhead is the share of net collections consumed by practice expenses — everything except physician compensation and owner distributions. The MGMA benchmark for orthopedic surgery practices is approximately 43–48% of net collections.¹ Enter your annual figures below to see where your practice stands and which categories are out of range.

What to include — and what to exclude:

Include: staff salaries and benefits, clinical supplies, facility costs (rent or mortgage interest), malpractice premiums, equipment leases and depreciation, marketing, billing services, and other operating expenses.
Exclude: physician owner compensation (draws, W-2 salary, K-1 distributions). MGMA overhead benchmarks compare practice expenses against collections — physician income is not overhead.
Implants and supplies: include only costs your practice entity actually pays. If implants are handled by the hospital or ASC and billed separately to payers, don't include them here. If your practice or ASC pays the invoice, include them.
Net collections: cash actually received from payers and patients after contractual write-offs — not gross billed charges.

Annual net collections ($) Total cash received from insurance and patients after adjustments and write-offs.

Primary subspecialty Used to adjust implant cost benchmarks — spine and TJA practices have materially different supply profiles.

Clinical & administrative staff ($) Wages, benefits, and payroll taxes for all non-physician staff: MAs, surgical techs, front desk, billing staff, APCs (PAs/NPs).

Clinical supplies & implants ($) Medical supplies, disposables, and implant costs paid by your practice. Enter $0 if implants are handled entirely by the ASC or hospital.

Facility — rent, mortgage interest, utilities ($) Office lease or mortgage interest, property taxes, utilities, and janitorial.

Malpractice insurance premium ($) Annual claims-made or occurrence premium paid by the practice entity.

Equipment — leases, depreciation, maintenance ($) Use annual book depreciation or lease cost — not the bonus depreciation deduction — for comparability with MGMA benchmarks.

Marketing & advertising ($) Website, advertising, referral outreach, and patient communication tools.

Billing, collections & revenue cycle ($) Outsourced billing company fees (typically 4–7% of collections) or in-house billing staff cost if not already counted in staff above.

Other operating expenses ($) Legal, accounting, professional dues, CME, office supplies, IT/EHR, and other recurring costs.

2026 Orthopedic Practice Overhead Benchmarks by Category

Benchmarks below are derived from MGMA DataDive practice financials and AAOE (American Alliance of Orthopaedic Executives) survey data, updated for 2025–2026 cost levels. All percentages are of net collections, excluding physician compensation.²

Category	Lean	Median	High	Key driver
Clinical & admin staff	20–24%	25–29%	30–37%	Staffing ratio (FTE per surgeon). Median is ~3.5–4.0 non-physician FTE per surgeon.
Supplies & implants	2–6%	6–12%	12–25%+	Varies dramatically by subspecialty and billing model. Pure professional-fee practices with no implant billing: 2–5%. Spine/TJA groups billing implants: 15–25%.
Facility	5–7%	7–9%	9–13%	MOB ownership vs. leasing. Owner-occupied practices show lower effective facility cost long term.
Malpractice insurance	2–4%	4–6%	6–10%	Spine surgeons in NY, FL, or PA can hit the high end ($100K–$165K/yr) even at $2M+ collections.
Equipment / depreciation	1–2%	2–3%	3–5%	In-office imaging (X-ray, fluoroscopy) and robotic capital calls (Mako) can spike this temporarily.
Marketing	0.5–1%	1–2%	2–4%	Referral-based practices spend less; cash-pay and concierge practices spend more.
Billing / revenue cycle	2–3%	3–5%	5–7%	Outsourced billing is 4–7% of collections. In-house billing is often more expensive when fully loaded with staff and software.
Other (legal, IT, admin)	1–2%	2–3%	3–5%	Single-surgeon practices tend to have higher legal and accounting costs as a percentage.
Total overhead	38–43%	43–48%	48–58%	Exclude physician compensation from all calculations for meaningful comparison to MGMA benchmarks.

Why overhead varies so much by subspecialty

Implant cost and billing model

The biggest source of overhead variation in orthopedics is implant cost — and whether your practice or your ASC bills for it. A spine or TJA surgeon operating entirely through a hospital or surgeon-neutral ASC will show near-zero supplies overhead at the professional practice level because the facility handles and bills the implant. A surgeon who co-owns an ASC where the ASC entity purchases and bills implants separately from the physician practice will also show low overhead at the professional practice level — the ASC entity carries the cost.

Only when the physician practice itself is purchasing and billing implants directly (less common but it happens in certain in-office procedure and ASC configurations) should you see supplies overhead above 10%.

Malpractice load by subspecialty and state

Spine surgeons in New York or Florida pay $100K–$165K/year in individual malpractice premiums. At $2M collections, that's already 8% from malpractice alone — before staff, facility, or supplies. Foot and ankle surgeons in Texas may pay $20K–$35K/year, putting malpractice at 1–2% of collections at the same revenue level. This is not inefficiency; it's subspecialty and geography. See malpractice cost benchmarks by subspecialty and state.

Staffing models

Private practices that employ surgical techs, MAs, physical therapists, and APCs in-house carry higher headcount but often generate more per-surgeon revenue. The key metric isn't staff cost alone — it's revenue per FTE. An orthopedic group employing PAs at $200K/year who generate $500K each in incremental revenue is running a 40% staff cost but a profitable model. Compare staff cost to revenue output, not benchmarks in isolation.

The four overhead levers most practices can actually pull

Where practice owners find the most leverage:

Staffing ratio. AAOE median is 3.5–4.0 non-physician FTE per surgeon. Practices above 5.5 FTE/surgeon rarely have a revenue justification. Attrition-based right-sizing (slow hiring, no backfill for voluntary departures) is more sustainable than layoffs.
Implant cost negotiation. Orthopedic implant pricing is opaque and negotiable. Practices and ASCs that benchmark invoice prices against comparables and negotiate with 2–3 competing vendors routinely cut implant costs 20–35%. The AAOS has published data showing wide variation in prices paid for identical devices across facilities.
Billing yield improvement. A practice collecting 88 cents per dollar billed can often improve to 92–94 cents with better denial follow-up, prior-authorization workflows, and coding specificity. A 4–6% yield improvement on $2M collections is $80K–$120K/year without changing headcount.
Fixed-cost productivity. Your clinic rent is fixed whether you see 15 patients per day or 25. Adding a late afternoon slot, hiring a mid-level to see post-ops, or extending hours to increase throughput spreads fixed costs across more revenue — dropping overhead percentage without cutting any dollar amount.

Overhead and your practice valuation: the direct connection

If you're considering a practice sale — to a partner, a hospital, or a PE-backed group — your overhead rate flows directly into your enterprise value. Simplified math:

$3M collections × 55% overhead = $1.35M EBITDA (before physician comp replacement)
$3M collections × 45% overhead = $1.65M EBITDA
At an 8× EBITDA multiple, that 10-point overhead difference = $2.4M in deal value.

PE buyers normalize EBITDA by replacing physician income at market rate ($600K–$900K for an orthopedic surgeon), but every dollar of non-physician overhead that's unnecessary reduces the multiple directly. Two years of disciplined overhead management before going to market can be worth more than the transaction legal fees you'll spend optimizing deal structure.

Use the practice sale calculator to model your EBITDA and enterprise value. The practice sale guide covers PE multiples and MSO deal structures.

Related tools and guides

Practice Sale Calculator — model EBITDA, enterprise value, and net proceeds
Selling Your Orthopedic Practice — PE multiples, MSO structures, rollover equity
In-Office Ancillary Services Revenue — PT, imaging, DME economics under Stark Law
Tax Deductions for Orthopedic Surgeons — bonus depreciation, accountable plans, SE deductions
Medical Office Building Ownership — SBA 504 structure, Stark Law NNN lease requirements
Choosing a CPA for Your Orthopedic Practice — 6 areas where a specialist CPA outperforms a generalist

High overhead or planning a sale? Get a specialist advisor.

A fee-only advisor who works with orthopedic practice owners can review your overhead structure, model your EBITDA under different staffing and billing scenarios, and help you prepare for a transition — whether that's 2 years or 10 years away. Free match.

Sources

MGMA "Manage overhead expenses by monitoring cost and revenue" — orthopedic surgery median overhead approximately 45% of net collections, defined as total operating expenses excluding physician compensation divided by total medical revenue. mgma.com/data/data-stories/manage-overhead-expenses-by-monitoring-cost-and-re. Also: Medscape "Five Key Benchmarks That Could Make or Break Your Practice" citing MGMA specialty overhead data. medscape.com/viewarticle/765783. Verified June 2026. ↩
Category-level benchmarks derived from: AAOE "AAOE Survey Illustrates Evolving Overhead and Staffing Trends," AAOS Now, June 2020 (aaos.org/aaosnow/2020/jun/managing/managing02/) — staff costs 34–37% of revenue, total overhead 58–60% in 2014–2017 data (definition includes broader cost base); MGMA DataDive Financials and Operations 2024 data cycle; AAOS "Unlock the Hidden Profits in Your Orthopaedic Practice" (aaos.org/aaosnow/2012/dec/managing/managing2/); AAOS "Value-Driven Use of Orthopaedic Implants" (aaos.org) for implant cost variation. Category ranges are representative of 2025–2026 cost levels and reflect common practice configurations — actual figures vary significantly by subspecialty, billing model, and market. ↩

Content verified June 2026. Benchmarks should be interpreted in the context of your specific practice model, billing structure, and geographic market. Consult a healthcare CPA for practice-specific financial analysis.