Healthcare Overhead Reduction: Occupancy Cost Is the Overlooked Lever

Site costs include rent, tax, insurance, and CAM. CAM means Common Area Maintenance. Tenants may pay these costs. Use the ledger for all site costs.

RCM means revenue cycle work. An advisor can check revenue and site costs. A CAM finding needs the lease, bill, files, and time.

I built CAMAudit so advisors can do this without being real estate experts. The tool compares the landlord's yearly bill to the lease. Then it flags likely charges that go past what the lease allows.

Healthcare Practice Overhead Rate: The share of a medical practice's collections used for operating expenses, including staffing, supplies, technology, insurance, and occupancy. Use the practice's own financials and a named benchmark source for any comparison.

Check site costs with care

Staff, supplies, software, and insurance need their own files and checks. Site costs need the same clear check.

The lease states the base rent. Tax and insurance files show other costs. A CAM bill has more parts. It shows the tenant's share of building costs. Check its math before the client pays.

Office costs may include HVAC, lifts, power, water, and guards. The lease shows what the tenant may pay. Files show the split rule.

Check the manager-fee base against the lease. Check the space in the share math. Pro-rata share is the tenant's part of shared costs. The lease and bill control the result.

The expense-side gap in RCM work

RCM consultants see the revenue cycle as two flows. Money comes in from payers. Money goes out to operations. The work that shows the most ROI lives on the revenue side. That means cutting denials, fixing coding, speeding up cash posting, and renegotiating payer contracts.

The expense side gets less attention. Practice managers track supply costs and staffing tight. Those costs move fast when you act. Occupancy costs look fixed. The lease is signed. The rent is the rent. The CAM bill seems like just a yearly tweak.

The lease may use a CAM formula. Check the share base. Check the manager-fee base. Check large project costs. A gap needs lease and file support. Then call it an error.

An RCM advisor may add a site-cost check to client work. CAMAudit checks the lease and bill. It gives source notes for each finding.

"RCM advisors optimize the revenue side of healthcare operations with precision. The model for recovery is identical." - Angel Campa, Founder of CAMAudit

Start with the practice's own files

Use the practice ledger to find its site costs. Split base rent from CAM, tax, and insurance. Do not use a broad market rate for one client.

Math alone is not a finding. The lease, bill, records, and open review period control the result.

The three CAM overcharges that hit healthcare most

I tested public CAM bill samples in CAMAudit. The tool flagged three charge types for review.

Management-fee review

The manager fee pays the firm that runs the building. It may sit in CAM. Some leases cap its rate and base. A fee above that rule is a flag.

Check the fee base for costs the lease bars. Check if the billed method matches the lease.

CAMAudit's management fee rule checks the billed fee against the lease cap. It flags the gap. Each finding shows the lease clause, the allowed fee, the billed fee, and the dollar difference.

The pro-rata share formula sets the tenant's slice of building costs. The lease names the top number, the tenant's space. It names the bottom number, the building's total leasable space. Errors happen when the landlord uses a bottom number the lease does not allow.

Check the top and bottom numbers in the lease. Ask for files if the bill uses a different method.

Capital costs billed as operating costs

Some leases split day-to-day costs from major project costs. A roof job may be a major project. The lease may keep it out of CAM. It may also spread the cost across many years.

Check if the lease allows the capital cost in CAM. The lease controls the CAM pool and split rule.

Add site-cost review to client work

Adding a CAM audit to your existing work is simple. It takes two extra steps.

First, screen clients to find who has CAM exposure. Look for NNN or modified gross leases with CAM pass-throughs. NNN means the tenant pays taxes, insurance, and CAM on top of rent. Gross-lease clients have no CAM exposure. NNN and modified gross clients do.

Second, get the CAM bill. Get the lease terms on costs. Get the share rule and fee cap.

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RCM consultant new service line: CAM audit recovery: the full guide to adding occupancy cost recovery to an RCM practice
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Sources

BOMA International. Experience Exchange Report (2024). https://www.boma.org/
IREM. Income/Expense Analysis: Office Buildings (2024). https://www.irem.org/
ASHRAE. Standard 62.1: Ventilation and Indoor Air Quality (2022). https://www.ashrae.org/
IRS Publication 535. Business Expenses. https://www.irs.gov/publications/p535
FASB. ASC 842: Leases. https://www.fasb.org/

Disclaimer: CAM facts only. Not legal or tax advice. Ask counsel on disputes. Ask an accountant on new work.

Frequently Asked Questions

How much of a practice's cost rate is site cost?

Site costs vary by practice, site, and lease. Use the practice ledger. Split rent, CAM, tax, and insurance. Use a named source only if it fits. Name the source.

What is the difference between base rent and CAM in a medical office lease?

Base rent is a fixed monthly amount specified in the lease. CAM is a variable annual charge representing the tenant's proportional share of building common area maintenance expenses. Under a triple-net or NNN lease, the tenant pays base rent plus a pro-rata share of CAM, property taxes, and building insurance.

Why do RCM advisors overlook CAM overcharges when optimizing healthcare overhead?

CAM may show as one line in site costs on the P&L. It can look fixed. The landlord sends a CAM statement once a year. The file can be hard to read. A site manager may not check each line. An RCM advisor may not see all site costs.

What CAM billing issues may affect a medical office?

Check the manager fee base against the lease. Check the space used to find the tenant share. Also check how the lease treats roof and HVAC work.

How does CAM audit fit RCM work?

CAM audit adds a site-cost check. The advisor gets bill and lease. The advisor runs CAMAudit. Then checks findings with the client.

How do you find a possible CAM billing gap?

The amount depends on the lease, bill, records, and review date. Use the client's files to check for a gap. Do not promise payback.