COVID-19’s impact on every aspect of society cannot be understated. The economic toll continues to grow daily. In every community, restaurants and retail stores permanently shut their doors, unable to survive the financial burden. People are put out of work, and physician practices have closed.
One area struck by the pandemic is the medical industry, and not for entirely obvious reasons. In the United States, healthcare spending declined by 18% in the first quarter of 2020. Hospitals have lost more than $200 billion. These figures continue to climb and shouldn’t be discounted. $200 billion of lost hospital revenue significantly impacts the country’s overall economy because healthcare revenue is about 18% of the country’s gross domestic product or $3.5 trillion.
COVID-19 Instant Negative Financial Impact
Only a few weeks into the public health emergency, a survey found that 97% of practices experienced a negative financial impact due to COVID-19.
This impact was caused by decreased revenue from a decrease in surgeries and office visits. Additionally, the COVID impact increased expenses caused by tech upgrades for telehealth services and supplies used to prevent the spread of COVID-19, such as masks and cleaning products.
41% of physicians have seen a volume decrease of more than 26%. They say this makes it extremely difficult for their practices to stay open for over a few months.
To offset the rising costs of providing health care in these trying times, physicians have taken pay cuts, furloughed their employees, or outright let their staff go. 43% of physicians reported reducing their staff because of COVID-19. The average medical office employs 17 employees, generating a yearly average of $3 million. With staff reductions, this total becomes drastically reduced.
Operating hours have also been cut to help offset this crushing loss of revenue. Some practices are only open a few days a week. A few practices have even resorted to asking for donations to remain open. Doctors have even dipped into their savings to pay their employees.
According to one study, 72% of doctors have been hit with a reduced income. All these financial impacts affect the entire gamut of specialties. From pediatrics to dentistry, times are tough and nearly unbearable for some providers.
Some doctors with small practices reported that they didn’t have much money in the first place. They claimed to have made less money pre-pandemic than when they started two decades ago. Most of a practice’s debt stems from overhead and pharmaceutical costs.
The monthly average operating costs for a medical office are $6,000.
This includes:
- Staff salaries
- Payroll services
- Vendors
- Utilities
- Office space
- Rent
- Insurance
- Taxes
- medical equipment
- optional Expenses (business-related travel expenses, marketing, etc.)
- Any outstanding loans
A medical practice is responsible for all these expenses, whether a public health emergency exists. Too many can’t keep up with these expenses when patient loads are smaller than ever.
How Many Practices Are Closing Because of COVID-19?
59% of polled doctors think that the pandemic will lead to a significant reduction in independent practices. It’s estimated 16,000 practices are closing.
As a result of COVID-19:
Of the 16,000 shuttered practices:
-
- 78% were specialists.
- 22% were primary care practices.
The number of private practices has been declining for years. However, that number is rapidly increasing due to the financial setbacks brought on by COVID-19.
These strains are forcing physicians to either quit or sell their practices and partner with hospitals and other medical groups. There’s currently no way to tell if the quality of patient care is affected by this change. What’s certain is the pandemic’s financial toll on practices nationwide.
More about 5ACVO
5ACVO is a sister company in the Fifth Avenue Healthcare Services family. Other sister companies include Primoris Credentialing Network (credentialing and provider enrollment specialists) and Fifth Avenue Agency (MPLI and medical malpractice specialists).
The team at 5ACVO will help provide a smarter, simpler, and better credentialing experience. At 69% less costs than conventional credentialing and a reduced credentialing workload of 88%, we can help fight against the increasingly complex healthcare costs during an increasingly difficult time to operate. To learn more about how working with a CVO can help cut costs, read the article 20 Ways A CVO Can Cut Costs.
This article was originally published by 5ACVO here. For more information, please visit 5ACVO.com or Contact Us.
