The COVID-19 pandemic and subsequent lockdown measures have led to a massive economic downturn. According to the U.S. Department of Labor, the unemployment rate as of June sits at 13.3% (up from 4.4% in March). The healthcare industry, which accounts for almost 20% of the GDP, is a significant factor in the coronavirus-driven recession.
Historically, the healthcare sector has been largely immune to recession due to stable consumer demand and price inelasticity. However, a combination of the lockdown measures and the restrictions of non-essential (elective) medical services has bucked this trend. Many hospitals and health systems have laid off and furloughed workers, or shut down their services as a result of financial strain to their businesses. They have not been able to perform the elective procedures that generate positive margins that keep them afloat.
As a result, there has been considerable media coverage on hospitals’ need for state and federal support. While there has been some national coverage of the financial plight of private practices and independent medical groups due to the pandemic, the true extent of a downgraded private sector has not been adequately addressed. These groups will have a greater need for aid moving forward.
Over the past 2 decades, there has been a lot of ongoing consolidation in the healthcare industry. For the first time in the U.S., employed physicians outnumber self-employed physicians. Healthcare systems and private equity investors have played a leading role in buying (“rolling up”) smaller providers. A combination of increasing administrative cost and complexity coupled with declining reimbursements led to this market dynamic.
This is not necessarily ideal, since independent providers are often on the front lines as primary care doctors that provide personalized care. These individuals often play a crucial role in coordinating care and providing preventive care that lowers costly hospitalizations and improves outcomes. With the increasing strain on private practice due to a decline in patient volume during the coronavirus pandemic, we may find ourselves pondering what a world without independent or private practice looks like. To prevent us from having to live in a world like that, federal efforts to aid hospitals should be aimed at also helping private practices, and there should be a shift to enact better reimbursement policies in the post-COVID-19 era to prevent a massive decline in private practices.
Hospitals and larger health entities have greater resources that enable them to weather these administrative pressures and enable them to grow. Consolidation has not lived up to its promise of lower healthcare costs, more efficiency, better patient experience, etc. In fact, in most cases, the opposite has occurred. In many cases, the cost of patient care is higher in hospitals than in an independent setting. This is even worse for those who find themselves uninsured, an issue especially salient due to all of the people who have lost their jobs during the shutdown and now face “chargemaster prices” for routine checkups that are marked up way above market value.
In addition to this, some studies have shown that physicians employed by hospitals and health systems are more dissatisfied than independent doctors. These realities and others may explain why the movement towards hospital employment was slowing down in recent years — that is, at least until the coronavirus outbreak. The pandemic put increased pressure on private practices due to the fact that they, like hospitals, are missing out on many revenue-generating elective procedures, and in some cases, patients are too afraid to come in for routine checkups and necessary follow-up care. To add on to the strain that private practices face, they don’t have the advantage of the $150 billion of federal hospital assistance from the $2-trillion relief bill that passed Congress.
Moving forward policymakers can take some intentional steps to help ensure the health of private practice in the healthcare delivery ecosystem. First, if and when another relief bill is passed by Congress, there should be funds allocated to directly support private practices that at least match the support hospitals received and will receive. Additionally, there should be payment parity for telemedicine consults with in-person visits by all public and private healthcare payers. This would enable private practices to better compete with establishment hospital systems for a growing market of virtual visits.
There are also broader adjustments to be made to healthcare financing to help put private practice on a more equal footing with hospitals. Medicare should stop reimbursing outpatient hospital centers more than they do for procedures done in private practices. Due to the bureaucracy that often accompanies billing and coding, the Center for Medicare and Medicaid Innovation should explore payment models that involve prospective and advanced payments. This would enable physicians to be reimbursed for their services right at the point of care delivery. This of course must be done with measures put in place to provide a check on overbilling. Lastly, in the formation of value-based models, there should be an adequate account of the unique circumstances and risks that private practices face.
We are at a crossroads in medicine. At the start of 2019, it was announced that for the first time ever that more physicians are employees than employers. This in and of itself is not a bad thing. However, if more physicians are opting for hospital employment due to policies and resulting economic constraints that favor larger healthcare entities, rather than by choice, then this trend may be of concern. It all comes down to creating a healthcare system that can provide patients with the best and most personalized care. To have this kind of system, we believe that there needs to be a robust private practice system within our healthcare ecosystem. We must take intentional steps to ensure the existence of this element as the coronavirus pandemic rages on.
Fisayo Ositelu, MD, is co-founder and CEO of Gentem.
Last Updated June 29, 2020