Physician practices reeling from COVID-19 financial losses

April 9, 2020

America’s physician practices face devastating financial losses because of the COVID-19 pandemic. Here's how they are coping.

America’s physician practices face devastating financial losses because of the COVID-19 pandemic. What will happen in the long run is unclear, but doctors and observers say the actions taken by the government so far to support practices are inadequate and that more needs to be done.

Currently, physician practices are seeing declines in patient volume of 30 percent to 75 percent, says Halee Fischer-Wright, MD, president and CEO of the Medical Group Management Association (MGMA). The business of primary care practices is down 40 percent to 50 percent, she says.

The situation would be even more dire were it not for telehealth and the new willingness of Medicare to cover virtual visits. “Since CMS changed their regulation of reimbursement, we’ve seen telehealth enthusiastically embraced across the country, to the point where it has become an integral part of care delivery just in the last three weeks,” Fischer-Wright says.

Nevertheless, many small independent practices are having difficulty in ramping up telehealth systems and workflows, observers say. Even if they can master this technology quickly, most small practices have no more than two or three months of operating expenses in reserve, notes Medhavi Jogi, MD, a co-owner of a five-doctor endocrinology group in Houston. At some point, unless the crisis ebbs fairly soon, many independent practices will have to consider reducing physician compensation and/or laying off staff to survive.

Some practices may not survive. “Without immediate governmental action, practices around the country will fail,” wrote Jeff Livingston, MD, a Texas ob/gyn, in a recent opinion piece. “The U.S. will be faced with an unprecedented crisis of unemployed physicians right at the potential peak of the COVID-19 pandemic.”

System-owned vs. independent practices

Physicians employed by healthcare systems are in better financial shape than independent doctors, at least for now. For example, internist Jeffrey Kagan, MD, of Southington, Conn., recently joined Hartford HealthCare, a large system based in Hartford, after many years as an independent practitioner. Kagan became part of Hartford on February 3 of this year, just before the COVID-19 crisis began in the U.S.

Kagan is very glad that he made the move when he did. “It couldn’t have happened at a better time. With the decreased volume of patients we’re taking care of, I’m able to get my salary. Otherwise, I don’t know whether I could keep my staff and overhead going.”

Another advantage of joining Hartford is that the system got Kagan up on its telehealth platform right away, enabling him to conduct virtual visits with many of his patients. He doesn’t know whether he could have made the transition to telehealth as well on his own, he says.

Kagan is still seeing patients with urgent non-respiratory issues in person, but is taking care of other patients via the telehealth app in the patient portal of Hartford’s EHR. His appointment volume has dropped to 40 percent-50 percent of what he was seeing in normal times. On a typical day recently, he saw three people in the office and eight by telehealth.

Pay cuts and layoffs

Yul Ejnes, MD, a Cranston, R.I., internist, is part of a large independent group, Coastal Medical. Unlike Kagan, he can’t count on a fixed salary. As one of the physician owners in the 125-provider, Providence-based practice, which bases compensation on productivity, he knows that the reduced volume he’s experiencing will eventually require him to take a pay cut.

Ejnes is still working in his office, but is doing mostly virtual visits. “We’ve converted our regular day schedules to telehealth-either audio-video or telephone,” he says. “Our organization has been able to set up a couple of urgent care clinics for people who really need to be seen. We’ve segregated that into respiratory sick visits and non-respiratory sick visits. We haven’t been able to reach some patients to tell them their office visits are being turned into telehealth visits, and they’ve come in. I saw one live patient this week, and everything else has been done remotely.”

Ejnes says he is now seeing two-thirds as many patients as he normally handles. Of the 12 virtual visits he conducted on a recent day, five were audio-video and seven were telephonic. When he sees people who have respiratory complaints, he manages them if they’re not too serious. If they’re too sick to handle over the phone but not ill enough to be sent to the ED, he refers them to the group’s respiratory urgent care clinic.

The group hopes to avoid layoffs, but private practices generally aren’t bringing in enough revenue to make payroll, Ejnes says. Some of his office’s medical assistants are working from home, because patients are not coming into the office. Administrative tasks such as managing lab results and handling correspondence and forms have also decreased significantly.

“There are other needs that are new, such as transitioning people from in-person visits to telehealth visits and teaching or guiding them in getting the apps installed,” Ejnes says. “But the overall result is that there might be a decreased need for support staff. And the possibility of furloughs is definitely an option.”

Small practices are threatened

Medhavi Jogi, the Houston endocrinologist, says his practice switched completely to telehealth in late March and sent all of its staff home. But it’s still unclear how long the practice will be able to survive in its current form, Jogi says.

Unlike many small practices, which have been reluctant to embrace telehealth, Jogi and his colleagues have been conducting virtual visits for the past five years. About 30 percent of Jogi’s visits were virtual even before the pandemic. Telehealth encounters comprised a much smaller percentage of the other doctors’ visits up to then. However, “they all knew how to do it, and the systems were in place,” he says.

The practice has had to give up in-office procedures, such as thyroid biopsies and thyroid ultrasounds, Jogi notes, because Texas banned all procedures at least through the end of April. Besides that financial hit, he notes, many patients with diabetes and other metabolic disorders are afraid to go to Quest or Labcorp for testing. That has reduced his patient volume, because there’s not much to talk about with these patients in the absence of recent lab results.

The cash flow in Jogi’s practice has not dropped off yet, because payments from claims filed weeks ago are still coming in. But he and his two partners (the other doctors are employees) are keeping a close eye on their bank statements. “Once we start seeing the daily [electronic] check deposits drop, we know we’re going to have to change some staffing,” he says.

As long as the group can keep telehealth volume up, he adds, he doesn’t think they’ll have to let the employed doctors go. “But it will probably tank at some time, and we’ll have to ask for concessions. If they’re not willing to concede, there may be layoffs.”

Long-term outlook

Observers expect that most independent practice leaders will delay layoffs for now. “The sequence is often that practice owners take home less money,” says Joshua Halverson, MHA, MPA, a principal at ECG Management Consultants. “I’m not hearing people talk about big layoffs of clinical staff. There are a lot of people still hopeful that this is a temporary, month or two situation, and people can hold off on that.”

Fischer-Wright of MGMA says that layoffs carry costs, which can include an increase in an organization’s unemployment insurance tax rate. “More often than not, it’s better to keep people furloughed [than to lay them off],” she says. “It’s probably better in the long run, if you have good staff, to furlough the staff. At the same time, I’m seeing practices that are using this crisis as an opportunity to separate staff that are less than optimal.”

Planning how to deal with staff and other overhead costs depends on how long the crisis lasts and how severe it is in a practice’s geographic region, Fischer-Wright says. MGMA forecasts that the crisis will continue for at least another three or four months and possibly longer.

“Practices should be reasonable about expectations for their volume and how long this downturn is going to last,” she says. “If you’re a primary care practice, this is probably a six- to eight-week period in which you can count on volumes being down 50 percent to 60 percent. Then you can figure another 4-6 weeks while that volume builds up, when your volume is down 20 percent to 30 percent. Then you’re going to have to expect your volume to be only 80 percent to 90 percent of what it was for the rest of the year. It’s not going to be 100 percent, because there will be high-risk populations who shouldn’t be in the office environment until we have an effective vaccine and treatment available.”