Physician practices take pandemic hit in tandem with hospitals, Kaufman Hall finds

Pandemic spurs consumer-friendly healthcare services that patients expect to continue

Dive Brief:

Hospitals and health systems dealing with pandemic-related financial struggles have also been hit with year-over-year declines in volumes and revenues to employed physician practices, according to Kaufman Hall’s quarterly Physician Flash Report.
Fewer patient visits, hospital diagnostic and procedural volumes compared to pre-pandemic levels put physician productivity — measured as physician work relative value units (wRVUS) per full-time equivalent — down 4.9% in October 2020 compared to the same time the year prior.
New patient visits also declined year over year, and lower productivity drove net revenue per physician FTE down 4.5% year over year.

Dive Insight:
Competitive telemedicine offerings and ongoing reluctance to receive in-person care are some factors Kaufman Hall attributes to the declines for physician practices, which have increasingly entered into employment arrangements with hospitals and health systems.
The report draws on data from 68,000 physicians and 28,000 other medical professionals from more than 100 specialties, via an online tool that physician groups use to track their own operations and financial metrics.
Kaufman Hall expects lower patient visits, hospital diagnostic and procedural volumes to continue through the first half of 2021.
But the disruption has mostly been market to market, American Medical Group Association Consulting President Fred Horton, who was not involved in the report, said.
“In a lot of cases depending upon how the organization’s response to COVID has been structured and how they’ve developed their telemedicine, that’s going to have an impact on what exists in their particular marketplace,” Horton said.
How long of an impact COVID-19 will have on compensation, productivity and revenues for physician practices, “is going to depend upon our national response and how that response is managed in any particular marketplace,” Horton said.
Kaufman Hall’s report found most metrics for the third quarter of 2020 remained far below 2019’s levels. Productivity rose 4.6% from July to October, but was down 4.9% compared to 2019 levels.
And net revenue per physician FTE rose 8.1% from July to October, but was still down 4.5% year over year.
Slight gains came in the late summer and early fall as some social distancing and non-urgent care restrictions were lifted. By October, most organizations were at or within 10% of pre-pandemic volumes, according to the report.
Health systems overall saw a 9.5% decrease in the level of investment needed to subsidize inadequate physician revenues from July to October, though year-over-year results were mixed.
Subsidies represent net patient service revenue minus total direct expense. Subsidies are divided by physician FTEs. After jumping 14.1% year over year from January to July, the median subsidy per physician (FTE) was up just 0.5% year over year in October.
The report also noted that physician practices are facing more competition from non-traditional, telehealth focused players. As virtual care use has exploded in the past several months, companies that market directly to consumers have increased their offerings and moved into new markets.
Kaufman Hall noted that a slow rebound in elective procedures led surgical specialists to have the largest decreases in productivity relative to 2019, followed closely by primary care and obstetrics and gynecology.
Hospital-based specialties like cardiac saw productivity increases on a per-FTE basis, alongside psychiatry due to telehealth expansions.
“The increasing size of employed physician groups and the level of investment needed to support them continue to strain health system operating margins,” said Cynthia Arnold, senior vice president at Kaufman Hall, in a statement. “While inpatient care and procedures offset those subsidies somewhat, long-term success will require joint system-physician leadership representation and robust data and analytics to address physician productivity issues.”

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