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Physician practices: Managing through the COVID-19 crisis

April 10, 2020 Article 6 min read
Derek Kaulfuss

Surviving today’s health crisis requires physician practices to take some short-term actions to stem financial losses. But long-term sustainability requires strategic and operational plans for moving forward when the crisis subsides.

Physician in a treatment room sitting on a stool browsing on her tablet device. The healthcare industry has had more than its fair share of disruption in recent years. But COVID-19 — and everything we’ve seen with it — is a completely new type of threat. Long-term sustainability requires physician practice leaders to think beyond the pressing needs of the current crisis and take actions now. Here’s how to put your practice in an optimal position to resume normal practice activities after the threat subsides while strategically and practically preparing for future crises.

First, stop the bleeding

For physician practices, priority No. 1 is assessing where skills are needed most and which physicians and staff members can accept the personal health risk of treating potentially infected patients. After the health and safety of patients and employees, the next most urgent consideration is the health of your practice itself.

As revenue cycles lengthen and cash flow dries up, physician practices are looking at every means of cash acceleration and preservation. Those that don’t have capital reserves (i.e., most physician-owned practices) are taking the most aggressive cash preservation actions — furloughing nonpatient-facing employees, reducing practice hours, treating emergency cases only, and closing nonessential offices. Many practices are also deferring bonuses and retirement plan contributions.

Evaluating lines of credit is usually the first step when practices need working capital, but it’s important to avoid taking on too much debt that will be difficult for you to pay off in future periods. To keep short-term cash flowing, many practices are issuing capital calls — and also considering new policies to maintain minimum capital reserves (more on that later) — as well as discussing with payers the potential to convert contract terms to a per-member per-month (PMPM) or concierge model.

It’s important to avoid taking on too much debt that will be difficult for you to pay off in future periods.

During this period of lower volumes, medical practices need to update cash flow projections, including an evaluation of potential cash inflows from emergency relief measures enacted by the Coronavirus Aid, Relief, and Economic Security Act (CARES Act) and Families First Coronavirus Response Act (FFCRA). While they’re not eligible for the accelerated Medicare payments offered to hospitals, physician practices will receive the 20% add-on to the Medicare DRG for COVID-19-positive patients. Also consider whether your physician practice could or should take advantage of a forgivable Small Business Administration loan under the Paycheck Protection Program or take one of the employer tax incentives.

Prepare to restart normal operations

During this trying time, remember that demand for your services hasn’t diminished; it’s been deferred. Once government mandates are lifted, your practice must have a plan to restart normal office operations and meet the pent-up demand for routine and elective services.

Remember that demand for your services hasn’t diminished; it’s been deferred. 

What will be your capacity restraints (availability of clinicians, surgical suites, etc.), and how will you compensate for them? Will you institute extended hours? Do you have a system in place for prioritization of rescheduled visits based on patient need?

Consider operational changes that you might need to make sure that patients feel safe coming to the office again. Is there a need for separate waiting rooms or even clinical areas for potentially infected patients? Do staff need to be segregated? Giving staff and patients comfort that they’re protected will be a key component in making sure that patient volume recovers quickly following this crisis.

Giving staff and patients comfort that they’re protected will be a key component in making sure that patient volume recovers quickly following this crisis.

Embrace telehealth

One of the lasting effects of this crisis will be a higher adoption rate of telehealth. Your practice has likely had a crash course in remote patient visits in the weeks since “medical distancing” became the new normal. Consider the role that remote patient care will play in your practice moving forward. Not only do remote visits reduce exposure for staff and patients, but they also allow practices to schedule more patient visits in a day. Greater efficiency will be very much needed as volumes start to pick up again.

Most important, consider how this crisis is influencing consumer preferences. 

Most important, consider how this crisis is influencing consumer preferences. For patients who experience the ease and convenience of remote doctor visits, there will be no going back. Also keep in mind that as unemployment rises to unprecedented levels, all physician practices will be wise to find ways to provide less expensive alternatives that allow consumers to reduce their overall health spend. Physician practices that don’t keep up with these consumer preferences, including expectations with regard to the cost of these virtual visits, will become less competitive and less attractive to investors and potential acquirers.

Prepare for the future

Understanding what worked and didn’t work during the current crisis will inform long-term strategy and models of care. Consider lessons learned in each of the following areas:

  • Inventory: Do you have multiple sources of vendors for personal protective equipment?
  • Scheduling priority: Are you able to stratify patients according to scheduling priority? Electronic medical record systems should be configured to allow practices to easily sort and aggregate patients into categories according to their level of priority. This will require collaboration between clinical and IT staff.
  • Referral patterns: As schedules fill up, how will you keep your important referral sources happy? For example, perhaps the scheduling prioritization system mentioned above should include a code that indicates that the patient was referred by an outside physician. On the flip side, does your practice need to reach out to the specialists and practices to whom you refer your patients to ensure they will continue to be prioritized even as these practices reach full capacity?
  • Human resources policies: Going forward, all physician practices will need to institute policies and procedures that can be quickly deployed in the event of future crises. For example, additional risk mitigation protocols might be needed based on the ages and preexisting conditions of clinicians of staff. Practices also should reevaluate policies related to furloughs and deferral of compensation in times of emergency.
  • Alternative sites of service: One lesson this crisis has clearly imparted is that the in-office visit is no longer the default option for patient care. In addition to telehealth, is it time to return to the days of the doctor’s house call?
  • Communication plans: In the event of a future health crisis, how will you communicate with your patients and other key audiences? While patient portals have become fairly ubiquitous, utilization has been relatively low, in some cases because patients don’t have access to the technology or don’t understand how to use it. To remove these barriers, physicians should take a cue from other types of providers. Many home health agencies distribute tablets that their clients use to access patient portals, health education, and even remote diagnostic tools.
  • Access to capital: As physicians are required to come out of pocket — or take out a personal line of credit — to carry the practice through this crisis, they’re understandably reevaluating how the practice is capitalized for future events. Is it time to establish a minimum capital reserve? This “last line of defense” is common in other types of partnerships, such as accounting and law firms. However, physician leaders need to weigh the need for financial stability against the effect such a policy would have on its ability to attract new physicians.
  • Potential for acquisition: One likely outcome of this crisis could be a spike in physician practice acquisitions. For several years, we have observed more and more physician practices initiating conversations with private equity and other potential acquirers or joint venture partners. Practices with robust telehealth systems and processes are likely to see higher valuations.

Practices with robust telehealth systems and processes are likely to see higher valuations.

Managing and surviving today’s health crisis requires physician practices to circle the wagons and take some short-term actions needed to stem the financial losses. But the long-term sustainability requires practice leaders to put in place strategic and operational plans to move forward when the crisis subsides.

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