Overhead as a single percentage is one of the most quoted numbers in practice finance and one of the least useful. It reports that something moved without indicating what.
What the single number does
Total overhead as a share of revenue is easy to calculate, easy to compare, and easy to put in front of a partner meeting. It also aggregates staffing, occupancy, supplies, technology, insurance and professional services into one figure, which means every movement inside it cancels against every other movement.
A practice can hold that percentage flat for a year while staffing costs rise and supply costs fall, and the number will report stability that did not happen.
Splitting it
Broken into categories the same data starts answering questions. Staffing usually dominates and moves for reasons that are knowable: a hire, a market adjustment, overtime covering a vacancy. Occupancy is mostly fixed and moves on lease events. Supplies move with volume and with purchasing decisions. Technology moves on contract renewals that were often signed years earlier by somebody who has since left.
None of that is visible in the aggregate. All of it is actionable once separated, because each category has a different owner and a different lever.
Attaching a reason to each movement
The habit that makes this work is unglamorous. On a fixed monthly cadence, each category that moved meaningfully gets a written explanation attached to it while somebody still remembers what happened.
By the time an annual conversation arrives, the story is already assembled, and it is a record of decisions rather than a reconstruction. Reconstructing a year of movement from a spreadsheet in one sitting is how a practice ends up with explanations that sound reasonable and are partly invented.
Benchmarks, used carefully
Published benchmark data is useful for orientation. It is much less useful as a target, for a reason that is easy to overlook: what a practice includes in each category varies, specialty changes the shape of the whole picture, and staffing models differ enough that two practices can be organized completely differently and land in the same band.
A category well outside the range is worth understanding. Being modestly off a median is usually noise, and managing toward it produces decisions that move a number without improving anything underneath it.
The comparison that actually holds
The most reliable comparison available to a practice is against its own history, where the definitions are at least consistent and the context is known. That is a lower-status answer than an external benchmark, and it is more likely to be true.
It also makes the conversation with an accountant more productive, because the question stops being whether the practice is normal and becomes what changed here and whether anyone chose it.
The category that tends to surprise people
When practices split overhead for the first time, the line that most often draws a reaction is technology and contracted services. It accumulates quietly: software added for a specific need, a service signed during a busy period, renewals that roll over automatically because nobody owns the date.
Individually each is small enough to approve without much thought, which is exactly how the category grows without anyone deciding it should. Listing what is in it, with a renewal date against each, is usually a short piece of work nobody has done recently.
About the author. Marina Davar has managed a private medical practice of about fifty people since 2020. She writes here about how the operational side of an independent practice fits together. More about Marina Davar, or her work in healthcare education.