COVID-19’s impact on provider compensation

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5/20/2020

The Medical Group Management Association’s most recent MGMA Stat poll asked healthcare leaders: “Has your organization’s provider compensation been impacted amid COVID-19?” The majority (62%) answered “yes, for all,” 20% responded “yes, for some,” and 19% indicated “no.” Respondents who answered “yes” were then asked to elaborate. Some of the most frequent answers included:

Reducing hours/salaries: In many physician-owned practices, many respondents noted that doctors took voluntary reductions in hours and salary.
Cutting bonuses: Many respondents reported eliminating performance bonuses.
Trimming CME: Some respondents’ organizations reduced funding for continuing medical education.

The poll was conducted May 19, 2020, with 1,032 applicable responses.

Initial effect of COVID-19 on medical group practices

According to MGMA’s COVID-19 Financial Impact on Medical Practices report, medical group practices were significantly affected during the first few weeks of the pandemic. At the time of the survey, April 7-8, 97% of practices revealed that they had experienced a negative financial impact directly or indirectly related to COVID-19.

In addition, practices reported a 55% decrease in revenue and a 60% decrease in patient volume since the start of the COVID-19 crisis.

As an independent anesthesiology practice in Alabama noted at the time, “Not only has 70% of our revenue disappeared, but our physicians are still working every day, exposing themselves to risks, taking care of patients, and taking care of their employees by continuing to pay them while they have taken over a 50% pay cut.”

Following that survey, the implementation of telehealth has helped some practices, but with the suspension of procedures, testing and office visits, most practices have been acutely affected. Some responses are more dire, such as this one from an MGMA Stat participant: “It's an eat what you shoot model with nothing to shoot.”

A handful of practices haven’t yet had to take such drastic measures in response to COVID-19. “We have kept base salaries intact. However, due to decrease in volumes, some people will not bonus out as they have done in previous years,” noted another respondent.

Pivoting during a crisis

In recent months, practices in certain specialties have been able to get fully up and running with telehealth. For these practices, telehealth has been vital for their survival. “As much as 20% to 40% of a practice's losses can be recouped through telemedicine, depending on variables like patients’ attitudes,” Travis Singleton, senior vice president, Merritt Hawkins, told Medscape, concerning the financial benefits of telehealth during the public health emergency (PHE).

Such was the case for Wilmington Health, a 200-provider practice in coastal North Carolina.

As Jeff James, chief executive officer, remarked in an AMGA/MGMA webinar, an existing emergency response plan was particularly useful when initiating telehealth in a short period of time: “It’s not uncommon for us to practice decentralized command and control at least once a year. … So for us to move out and be able to manage operations distantly wasn’t a big challenge for us compared to what some others have faced.”

Within three days, Wilmington Health went from not using telehealth to 100% physician utilization. By late April, the practice was already back up to about 70% of normal overall production.

On the other side of the state, Mountain Area Health Education Center in Asheville also became fully functional with telehealth in no time. According to Shane Lunsford, executive director, the 170-provider family medicine, OB/GYN, behavioral health practice had planned to institute telehealth by the fall, but COVID-19 expedited the process.

“We moved from having almost 1,000 encounters a day in person to now we have about 650 virtual appointments every day,” noted Lunsford regarding the success MAHEC has had in bringing business back to nearer-to-normal levels, which has not been the case for every practice. “We’ve seen a lot of practices that had about 50%-70% reduction in overall visits, and they’ve implemented telehealth … and they’ve struggled to build the patient volume back up,” said Lunsford.

While many practices have been amenable to these stark changes in their care delivery processes, they have struggled with inadequate reimbursement for telehealth visits from Medicare, Medicaid and many commercial plans. Fortunately, following significant advocacy efforts by MGMA and other industry-leading associations, Medicare largely improved telehealth access and payment parity causing many commercial payers to follow suit.

What lies ahead

As practices have begun to reopen and attempt to resume normal operations, some patients may still be apprehensive about in-person encounters. This is a concern because some major private payers have already announced that they plan to put an end to telehealth flexibilities as early as June 1. Additionally, the Department of Health & Human Services (HHS) will likely retract Medicare’s telehealth flexibilities once the public health emergency is lifted, which could happen at any time. If so, practices may need to revert to previous rules that limited Medicare reimbursement for telehealth.

Telehealth has been essential during COVID-19 for many practices, but it likely will not sustain practices for the long term, particularly practices that rely heavily on in-office lab tests and elective procedures for revenue. The most recent economic aid packages passed in Congress have offered temporary relief to some practices, but patient volume needs to get closer to pre-COVID levels before revenue can recover.

Given the ongoing financial impacts, medical practices of all sizes and specialties have been forced to lay off, furlough and/or reduce physician salaries.

“COVID-19 has had a dramatic impact on the healthcare industry with productivity halting for many medical practices,” said Halee Fischer-Wright, MD, MMM, FAAP, FACMPE, president and chief executive officer, MGMA. “Compensation models will look different in the near future based on shifting productivity and demands on physicians and within the industry.”

In particular, independent physician practices could face an uphill battle because of lag time in their billing cycles. As Fischer-Wright told the Huffington Post, “This acute, unexpected drop in volume that translates within 30 days to no revenue is adversely impacting medical practices at a time of national health crisis.” Echoing those sentiments in an interview with Medscape, Merritt Hawkins’ Singleton commented that private practices “don't have a financial cushion and will start seeing big drops in revenue at the end of May.”

That said, many experts believe that the fluidity of the situation makes it difficult to predict the impact COVID-19 will have on practices going forward. Gary LeRoy, president, American Academy of Family Physicians, summed up how difficult it is to make accurate predictions, telling Medscape that, “The information we learn in the next hours, days or months will probably change everything."

MGMA STAT

Would you like to join our polling panel to voice your opinion on important practice management topics? MGMA Stat is a national poll that addresses practice management issues, the impact of new legislation and related topics. Participation is open to all healthcare leaders. Results of other polls and information on how to participate in MGMA Stat are available at: mgma.com/stat.