Trust Levels High, Volumes Low
New Kaufman Hall research on how the COVID-19 pandemic has affected consumer attitudes illustrates the dilemma which many physician groups face today. Even as physicians are sought out by their patients for trusted advice on staying healthy during the pandemic, their offices are seeing significant declines in patient visits. Restoring equilibrium between patients’ trust and their confidence in returning for visits likely will require significant effort and time.
Respondents to our survey said that physicians are second only to public health organizations (e.g., the World Health Organization and Centers for Disease Control and Prevention) as the most trusted source for information on staying healthy during the pandemic (Figure 1).
At the same time, consumers’ willingness to go to their doctor’s office to seek non-emergency care has declined significantly, from 64% pre-pandemic to 33% today. Nearly as many of the consumers surveyed would be as likely to delay care (28%) as go to their doctor’s office (Figure 2).
These consumer sentiments align with evidence of reduced volumes across physician practices. A new study from the Commonwealth Fund finds that volumes have declined between 30% to 79% percent across a range of practice areas and specialties as a result of COVID-19.
Disparate Impacts Across Physician Practices and Specialties
COVID-19’s impact on physician groups is being driven by two primary factors. First is consumer anxiety over contracting or spreading the virus. That was by far the most significant factor respondents to our consumer survey cited as a reason why they would choose to delay care, with 71% of respondents citing this as a concern (Figure 3).
The second major factor is a ban on many surgical and medical procedures in an effort to preserve resources, including personal protective equipment (PPE), needed to care for COVID-19 cases. As of April 21, 2020, the American College of Surgeons listed 31 states (including the District of Columbia) with executive orders banning certain dental, surgical, or medical procedures in effect.
One potentially promising development, especially for primary care groups, has been the rapid expansion of telehealth in response to the pandemic. Forrester Research now predicts that the number of telehealth visits in 2020 will soar to 1 billion, up from an initial estimate of 36 million visits, with 900 million of these visits related to COVID-19. Groups that already had telehealth capabilities in place stand to benefit most from this expansion; Forrester also estimates that only 24% of healthcare organizations had a virtual care program in place as of January 1, 2020. The range of cases and rate at which they will be reimbursed for telehealth is also an issue. The Centers for Medicare & Medicaid Services (CMS) has temporarily expanded access to telehealth services and is paying for them at the same rate as in-person visits. Commercial insurers are following suit, but policies differ across insurers and geographies. In the long term, telehealth’s viability will depend on temporary expansions being made permanent and policies, including payment parity, becoming more uniform across payers.
Telehealth is not yet a viable option for many specialty providers or specialists who derive significant volumes of business from in-person procedures (e.g., anesthesiologists or radiologists). Geographic location will be a key driver for specialty groups, as states that have not been as heavily affected—or are seeing stabilization or lower infection rates—begin allowing procedures to resume. For specialty groups that have productivity-based compensation models, sharp volume declines have translated into equally sharp declines in physician income. While some groups are providing income guarantees, others are not in a position to do so.
The Path to Recovery
The path to recovery depends first on the relaxation of bans on non-emergency procedures. But even with those bans lifted, physician groups will still have to address patient concerns over the safety of office visits and procedures.
One of the biggest obstacles in creating a safe environment for patients will be ensuring sufficient access to testing and PPE. This challenge will vary depending on physician practice size and geography; a recent nationwide survey of primary care practices found that 32% have no capacity for testing and 52% have no PPE. Groups will also need to put in place protocols that limit the number of patients in a facility at any given time and minimize contact between patients.
Practices will also have to work around workforce disruptions. In areas that have seen COVID-19 surges, clinicians have been redeployed to help care for COVID-19 patients. Absences due to illness or the need to quarantine are affecting both clinical and front-desk staff. Widespread shutdowns of schools are putting additional stress on staff who need to find child and family care solutions. Finally, many physician groups have had to furlough staff and will have to time the end of furloughs to projected increases in patient volumes.
Practice groups should anticipate volume growth that is more “U-shaped” than “V-shaped.” The Medical Group Management Association (MGMA) has estimated that volumes will gradually increase, but will not exceed 80% - 90% of historic volumes by the end of the year.
Bridges to a Post-Pandemic Environment
Given the significant financial impact many physician groups have suffered, and the likelihood of a prolonged path to recovery, physician groups should consider all options that can form a bridge to a post-pandemic environment.
Many physician groups qualify for loans and other financial assistance being offered through the Coronavirus Aid, Relief, and Economic Security (CARES) Act. The American Medical Association and other trade associations offer resources to help physician groups understand the options available to them.
Some banks have been stepping up their support of physician groups, which may be able to extend or start new lines of credit or seek other loan assistance to help cover gaps in liquidity.
Smaller or mid-size practices may be able to find a home with larger groups that have the bandwidth and financial wherewithal to bring them in. Alignment with a larger network can take many forms, from looser forms of alignment such as participation in an independent physician association, clinically integrated network, or accountable care organization, to tighter alignment through a partial or full sale of assets to a larger organization in exchange for an employment agreement.
Larger practices seeking to increase liquidity have several possible options, including:
- Sale of a minority interest in the practice
- Financing alternatives, including convertible debt that can enable downstream equity participation
- A sale/leaseback of real estate owned by the practice
- Health system subsidies for needed infrastructure investments
Physician groups of all sizes should begin to consider what their practices will look like in the post-pandemic environment, and what their needs will be. Certain changes that have been made in response to the pandemic may prove to have a lasting impact on care delivery, practice patterns, and group finances. A vision for the future will help determine what bridge the group should pursue to get there.
*Data for Figures 1, 2, and 3 are based on responses from 500 consumers to a survey fielded the week of April 6, 2020.