MGMA CFO analyzes the financial impact of COVID-19 on physician practices and outlines some long-term strategies that healthcare organizations should implement as a precaution in case another pandemic occurs. These strategies may help avoid the negative financial impact we saw with COVID-19. Continue reading below to learn more!
The path forward to a more financially sustainable operation and prosperous future remains tenuous for most medical groups but there are opportunities for leaders who are willing to make the necessary changes.
While hospitals and health systems suffered historic financial challenges related to the COVID-19 pandemic in 2020, medical groups and physician practices were not spared either. These smaller provider organizations endured similar constraints due to declining revenues and rising expenses, a trend that hasn’t ceased thus far in 2021.
The path forward to a more financially sustainable operation and prosperous future remains tenuous for most medical groups but there are opportunities for leaders who are willing to make the necessary changes. Akash Madiah, CFO of MGMA, outlines the long-term strategies that medical group executives should follow to be more resilient and less vulnerable if another pandemic or industry-changing calamity occurs.
This transcript has been edited for clarity and brevity.
HealthLeaders: What is your advice for financial executives at provider organizations as they continue to deal with the difficult dynamics caused by COVID-19? Are you optimistic or pessimistic about their prospects? Why or why not?
Madiah: First, I’d advise that everyone take advantage of the federal financial assistance programs, namely the [CARES Act] Provider Relief Fund, which has now been reopened, and the Paycheck Protection Program. Our government affairs team based in [Washington, D.C.] has done remarkable work advocating for [physician] practices and organizations to receive relief through the pandemic. MGMA members have been involved and active in the advocacy efforts. In one of our grassroots campaigns, we mobilized 2,000 medical practices to send over 7,000 letters to Congress in less than 48 hours and it helped secure sufficient funding for medical practices.
In the relief packages, there’s over $175 billion allocated for healthcare providers, so there is available money out there. These programs were put in place to help medical practices and businesses stay afloat and overcome the downside impact of the pandemic. With respect to these programs, they’re loans but there’s an administrative aspect to these. I think with calendar year 2021, there’s going to be a lot of backend work for the medical group community to make sure that the loans and grants are forgiven. That’s the burden for the healthcare community at large, but overall, I’m pretty optimistic about where things are going.
The spring and summer of 2020 were the worst of times and the darkest period. We’ve had an uptick since as people feel more comfortable going back to doctor’s offices. [With] people who skipped out on their annual checkups, those dollars aren’t ever coming back, but that’s where those relief programs were meant to help. There is a backlog of elective procedures; I think the trend is going up, and I feel that’s going to continue through the rest of the year, especially with the vaccine rollout.
HL: What role should the federal or state governments play in assisting these care providers that are facing a dual-threat to their bottom line? Additionally, is there any action that the payer community should take to help their struggling counterparts on the provider side?
Madiah: As I mentioned, the money is out there, so it’s up to providers to access that. I think the government has responded and everybody should be accessing the dollars based on their eligibility. But now going forward, I think the biggest thing government can do is ease the administrative burden to make sure that reconciliation and forgiveness of loans is easy for the medical groups.
Needless to say, medical groups are going to be busy enough this year, and focusing on patient care should be paramount and not bogged down by the administrative burden. I’ll also add that our CEO Dr. Halee Fischer-Wright sent a letter to the Biden administration [earlier this month] asking that medical group practices are included in the vaccine distribution strategy given their role as community providers across the country.
The payers are a little trickier, they are under no obligation to help, but I would say any cooperation and long-term view can help since we’re all in this together. [Payers] have a role in supporting the mechanisms that keep both patients and medical practices healthy in 2021, specifically making sure things that helped providers through the pandemic, like reimbursements for expanded telehealth services, continue. Then, like the government, any reduction to the administrative burden, such as relaxed prior authorization, can only help going forward.
HL: Are you fearful about the continued effort by private equity firms to acquire medical groups or physician practices? What impact do you think that behavior will have on the healthcare industry at large?
Madiah: When private equity enters an industry, there’s a general sense that they will cut costs, slash-and-burn, and then sell it for a profit. I think that’s probably the most pessimistic view of them. I’m not fearful of them; they’re a player in all industries across America and they can cut costs in a good way and try to create synergies to make sure revenues are increasing. When it comes to healthcare, there’s a fear [that private equity] is going to hurt the patient and decrease access to healthcare. The profit tone that comes along with private equity often takes away from the altruistic tone that we convey with our members at MGMA. That’s the push and pull with private equity.
The big question is how will [private equity] generate the returns they’re used to seeing while also improving the patient experience, which again means more access and better outcomes. If they’re willing to invest in technology and processes that can help the industry, there can be an upside. But that comes at a time horizon that’s a little bit longer than they’re typically used to because while healthcare is continually changing, the speed of that change is not always conducive to what private equity is traditionally invested in. With our members there’s general skepticism with what approach [private equity] is going to take; are they going to be investing for the long-haul or are they taking the short-term view and motivated by profits?
HL: What are the critical long-term strategies that medical group executives should follow to be more resilient and avoid being vulnerable if another pandemic or industry-changing calamity occurs?
Madiah: The biggest thing is always to be vigilant. On the expense side, make sure there’s no extra waste in your practice and [don’t] worry about cutting things when the money is tight. The other part of that is being on the offensive, to the extent you have the resources to do so. Invest in your organization to make it more efficient or profitable now rather than being reactive in an urgent situation in the future.
One example from the pandemic is telehealth. That was a huge lifeline to a lot of practices to make sure revenue was still streaming in, but many practices had not implemented telehealth prior to COVID-19 and they were being more reactive. We’re trying to invest more in data now to make sure we’re looking ahead and being prepared for the future.
[Referencing] the MGMA year-in-review report, a lot of practices are changing the way they measure their key metrics of success and looking at things on a more frequent basis rather than a monthly basis.
This doesn’t just go for healthcare, but reassess space needs. Understand how successful you are as a remote organization and what you should be investing in going forward. That applies to a number of industries across America, but the bottom line is to be proactive, try to foresee what challenges you need to get ahead of, and make sure to invest in those areas to the extent that you can.
Editor’s note: This conversation is a transcript from an episode of the HealthLeaders Finance Podcast. Audio of the interview can be found here.