Operating costs rose at 84% of medical groups in the first half of 2026, according to MGMA's June 30, 2026 poll of 221 practices. Only 47% reported revenue growing enough to match, down from 56% a year earlier, so the gap between rising bills and rising income stayed wide through the middle of the year.
The trend is not new, but the size of the gap is. Practice leaders who used to cover a slow quarter out of reserves now have less room to do that, and the numbers below show why.
Costs are still climbing, just not as fast
MGMA's June 23, 2026 poll of 251 medical groups found that 84% reported year-to-date operating costs above the same point in 2025, with 8% flat and 8% lower. Respondents who saw an increase clustered around 11%, most falling between 5% and 20%. That share is down from 90% reporting higher costs in a June 2025 poll, 92% in 2024, and 95% in 2023, so fewer practices are seeing cost increases even though the increases stay near universal.
Broader inflation adds pressure underneath the practice-level data. Annual CPI growth measured 4.2% in May 2026, up from 3.8% in April. Medical care prices ran 3.1% higher year over year in March 2026, with medical services up 3.7%. PwC projects an 8.5% medical cost trend for 2026 group health plans, and separate forecasts put supply chain cost growth at 2.41% and pharmaceutical price growth at 3.35% for the year. Labor, supplies, drugs, insurance, and rent were the cost drivers MGMA respondents named most often.
Revenue growth is not keeping pace
In the same June 30, 2026 MGMA poll, 47% of medical groups reported total year-to-date revenue higher than 2025, 14% reported it about the same, and 36% reported a decrease. A year earlier, in MGMA's June 17, 2025 poll, 56% reported revenue growth and 30% reported a decline, an advantage of 26 percentage points for practices seeing gains. In 2026 that advantage shrank to 11 points, a sign that cost lines and revenue lines are moving toward each other instead of apart.
Medicare payments still trail the cost of care
MGMA's February 24, 2026 poll of 166 medical groups found 80% report Medicare reimbursement below their cost to deliver care, against 15% reporting rates equal to cost and 5% reporting rates above it. That share has grown from 73% in a comparable 2021 MGMA measurement. Over a longer stretch, MGMA data shows total operating cost per FTE physician rose more than 63% from 2013 to 2022, while the Medicare conversion factor rose only 1.7% over the same nine years.
The 2026 fee schedule did raise the conversion factor, to $33.57 for qualifying APM participants, a 3.77% increase, and to $33.40 for other clinicians, a 3.26% increase. CMS also applied a new efficiency adjustment of negative 2.5% to work RVUs and intraservice time for more than 7,000 non-time-based CPT codes, a change that shifts payment away from procedural work and toward evaluation and management visits.
Denials and slower collections widen the gap
AMS Solutions' 2026 benchmark report on medical billing put the industry-wide claim denial rate at 9%, up from 7.5% in 2023. Average days in accounts receivable rose to 42, up from 38. Denial rates vary by specialty: neurology practices see initial denials on 14% of claims, the highest rate in the report, followed by home health at 13% and physical therapy at 11%. The report ties part of the neurology gap to professional and technical split errors, which it estimates cost mid-sized practices between $30,000 and $80,000 a year.
Cost and revenue indicators, earlier years versus 2026
| Metric | Earlier year | 2026 | Source |
|---|---|---|---|
| Groups reporting higher YTD operating costs | 95% (2023) | 84% | MGMA Stat, June 2026 poll |
| Groups reporting YTD revenue growth | 56% (2025) | 47% | MGMA Stat, June 30, 2026 poll |
| Medicare pay below cost to deliver care | 73% (2021) | 80% | MGMA Stat, Feb. 24, 2026 poll |
| Industry claim denial rate | 7.5% (2023) | 9.0% | AMS Solutions 2026 Benchmark Report |
| Average days in accounts receivable | 38 days | 42 days | AMS Solutions 2026 Benchmark Report |
Where practices are looking for relief
HFMA puts the U.S. revenue cycle management market at about $90.6 billion today, projected to reach nearly $308 billion by 2030, which shows how much money is moving into tools built to close this gap. In an HFMA survey of 95 healthcare finance professionals, 27% said their organizations are deploying AI at scale across multiple revenue cycle functions, and 53% are running pilots in select areas. McKinsey & Co. estimates that AI in the revenue cycle could cut the cost to collect by 30% to 60%, alongside faster cash realization.
None of that changes the fee schedule or the price of supplies. It does mean practices have more places to look for margin than they did a few years ago, from automated denial follow-up to eligibility checks run before a patient arrives.
What the numbers mean for practice leaders
The 2026 data points to a specific problem: the space between what a practice spends and what it collects is getting narrower, and it is narrowing because the two lines stopped moving together, not because either one swung wildly on its own. Days in A/R at 42, a denial rate near 9%, and a Medicare payer mix that MGMA respondents say runs below cost are three separate pressures landing on the same practices at the same time. Tracking only the revenue side, or only the cost side, misses the gap that is actually driving the squeeze.
Sources
- MGMA, "Revenue growth narrows as costs climb: the 2026 squeeze on medical practices," 2026
- MGMA, "Operating costs keep climbing for medical practices in 2026," 2026
- MGMA, "2026 Medicare reimbursement changes: Tracking what matters," 2026
- HIT Consultant, "AMS Solutions Releases 2026 Benchmark Report on The State of Medical Billing," July 31, 2026
- HFMA, "2026 Revenue Cycle Benchmark Report: Where Leading Providers Are Adapting and Where They're Struggling," 2026
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