Medical group revenues falling faster than expenses

COVID-19 volume declines continue to slow the industry’s rebound.

Medical groups are still feeling the squeeze of the COVID-19 pandemic as higher expenses persist.

According to a news release from the American Medical Group Association (AMGA), the 2021 Medical Group Operations and Finance Survey found that median net revenue and expenses both declined for medical groups in 2020, but revenue is declining more quickly than expenses due to the continued volume decrease due to the COVID-19 pandemic.

“Although 2020 was in the height of the COVID-19 pandemic, many groups adapted during that year and made changes that will remain in place going forward,” Rose Wagner, RN, MHS, FACMPE, AMGA Consulting chief operating officer, says in the release. “Therefore, the pandemic resulted in many positive operational changes and learnings that medical groups can use to build upon. This survey is a critical tool to understand the financial and operational impact of the pandemic on medical groups.”

Median provider salary and benefits expenses as a percent of net revenue rose from 72.1 percent to 84.9 percent as a result of compensation being protected during COVID-19 along with decreased productivity. When it comes to clinical staff, median salary and benefits expenses as a percent of net revenues dropped from 24.2 percent to 22.8 percent which is tied to the impact of layoffs, furloughs, and care model/process changes due to the pandemic, the release says.

Meanwhile, the total operating expenses as a percent of net revenue, beside salary and benefits, rose from 21.7 percent to 29 percent.

"We have seen the median provider salary and benefits as a percent of net revenue trending upward in recent years, leaving a smaller percentage of the expense structure to cover staff salaries and benefits and operational expenses,” Wagner says. “This situation is not sustainable, and medical groups must focus on ensuring optimal efficiency in practice operations.”

The survey also found that median annual visits per provider declined in 2020, falling from 2,480 in 2019 to 2,331 across all medical groups. There was a drop from 2,049 to 1,471 in system-affiliated practices and from 2,765 to 2,606 among independent practices, according to the release.

System affiliated medical groups utilized more advanced practice providers (APPs) than independent medical groups, the ratios between the two were near identical, the release says.

“APP to physician ratio did decline in 2020 in primary care and medical specialties, most likely due to layoffs and furloughs as a result of COVID-19,” Wagner says in the release. “Prior to 2020, the APP to physician ratios had been increasing year over year.”