How Physician Practices Can Survive and Thrive in the Post-Pandemic Era
The initial shock of the COVID-19 pandemic rattled our healthcare system, but now it seems that we are learning to live with COVID-19 and its effects. Though there is talk that the emergency period will be extended due to the increase in new cases as a result of new variants, the business of healthcare for physician groups in the post-pandemic era looks quite different than a few years ago.
Many of the changes brought about by COVID-19 were structural or administrative in nature and will be (should be or have been) absorbed into standard clinic management:
- Patient screening for fever, illness, or immune-compromised conditions
- Use of physical barriers to protect staff
- Masking of staff
- Vaccination and sick-leave policies
- Support for remote workers
- Enhanced record-keeping and reporting for federal reporting such as the Paycheck Protection Program and the Provider Relief Fund (PRF)
The pandemic not only impacted the care that physician groups and health systems provided to patients but also had a major impact on the ownership of physician groups. According to research sponsored by the Physician Advocacy Institute, the percentage of employed physicians increased from 62% in January 2019 to 74% in January 2022. That means that since 2019, approximately 108,700 additional physicians were employed by hospitals or corporate entities over the three-year study period – and 76% of that shift occurred after the onset of the COVID-19 pandemic. The number of practices owned by private equity firms (or corporate entities) increased to 4.4% in 2020 after reporting minimal activity in previous years, according to the American Medical Association’s Division of Economic and Health Policy Research.
Whether your organization is a private practice or an employed group, it undoubtedly is facing new challenges brought on or exacerbated by the COVID-19 pandemic. We believe that there will be significant pressure on practice operating margins over the next year.
- Continuing pressure to restore volumes to pre-pandemic levels due to continued COVID-19 variants and continued nursing and staff shortages
- Reduction/elimination of federal and state PRF and other funding, even though the emergency period will likely be extended through the end of the year
- Patients opting for virtual visits versus in-person visits
- Flat commercial payer reimbursement
- Scheduled 2023 cuts to the Medicare Physician Fee Schedule
- Payer mix shifts from Medicaid to Affordable Care Act (ACA)/Children’s Health Insurance Program (CHIP) as a result of reduced federal funding to the states for their Medicaid programs
- Physician shortages and related increased compensation for both physicians and non-physician providers
- Increase in nursing and other staffing costs due to the impact of the “Great Resignation,” burnout, and a significant increase in inflation
- Increased supply, equipment, and facility costs due to supply chain pressures
How to Thrive in the Post-Pandemic Environment
What can your practice do to survive – and thrive – in the post pandemic environment? The following includes a few suggestions that can alleviate some of the margin pressure and create potential opportunities.
- Optimize provider schedules based on the type of visit and the provider (e.g., in-person versus virtual and physician versus non-physician provider).
- Query your electronic health record (EHR) system from the beginning of the pandemic and reach out to patients who have not followed up with recommended follow-up visits or procedures.
- Make sure all visits are being billed and at the appropriate level. That includes:
- Office visits
- Inpatient rounding and consultations
- Assess your revenue cycle operations to be sure you are collecting every dollar.
- Review and, if appropriate, renegotiate professional services agreements (PSA) for services provided to external organizations.
- Pursue shared savings programs with affiliated hospitals.
- Review your practice’s total compensation to be sure it is aligned with the needs of the providers. Make sure to review compensation and benefit plans, including time off.
- Ensure that clinical staff optimization is aligned to “top of license work” and that you are leveraging medical assistants and other staff.
- Review space and facility needs and adjust accordingly. Many practices will continue to allow remote workers in revenue cycle and other non-clinical areas. Consider encouraging remote work if eliminating the cost of office space can benefit the bottom line while maintaining the quality of work.
- Review supply contacts and leverage affiliate group purchasing organizations and/or health system sponsored contracts.
- Review all service agreements and adjust the frequency and terms if needed (e.g., cleaning contracts, shredding contracts, biohazard and sharps removal contracts, answering service contracts, revenue cycle vendor contracts).
These steps are just a few ways physician groups could begin to weather the challenges of the post-pandemic era. Practice administrators have to be “on their game” now more than ever in this environment. But every healthcare group is unique. Whether you need help identifying potential margin improvement opportunities or want assistance implementing an action plan to improve your bottom line, KSM’s team of healthcare specialists is here to help. Contact your KSM advisor or complete this form to get the discussion started.
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