After payroll, cost of goods sold is the biggest check your practice writes. Every vaccine, every suture pack, every bag of renal diet, every reference lab panel. Most owners know their revenue to the dollar. Far fewer can tell me their COGS percentage, what’s in it, or whether it’s moving the wrong way.
Here’s why that matters. On a $2 million practice, every one percentage point of COGS is $20,000 a year. Running 26% instead of 22% is $80,000 that never reaches your bottom line. Same doctors. Same clients. Same hours.
Real talk: you don’t fix this by buying cheaper gauze. You fix it by knowing what your number is, what it should be for your hospital, and which lever is actually broken.
At a glance
- The goal: COGS at 22% or less of revenue.
- Well-managed practices: 22.8% (2015) and 23.4% (2019 study).
- What it’s worth: every 1 point of COGS is $20,000 a year on a $2M practice.
- Biggest lines: drugs and parasite products are more than 60% of COGS.
The full guide covers what the AAHA/VMG Chart of Accounts counts as COGS, what the published benchmarks actually say, category-by-category benchmarks from well-managed practices, a step-by-step method for finding where your COGS is leaking, and eight ways to bring it down without cutting care.
Leave a Reply