COVID-19 will have lasting effects on providers, including how they operate and how they’re paid

It’s almost paradoxical that healthcare has been one of the hardest hit industries within the U.S. during the global COVID-19 pandemic. Unanticipated impacts on patient care and medical practice operations will be felt for years to come.

From the delay of preventive care and non-emergency procedures and surgeries to the rapid adoption of telehealth to volatile patient volumes, we know that how we engage and compensate healthcare providers will continue to shift, but leading with a strategy of hoping we will return to the healthcare industry that we once knew will fail.

The near future remains vague. However, we know that we need more healthcare providers—and not just because of COVID-19. Our nation is facing a demographic shift to a sicker and older population. We have an upcoming election that will challenge us to choose a healthcare future based on the political ideology that best represents our personal experiences with the COVID-19 pandemic. Our healthcare workers are suffering more than ever from stress and mental health issues—burning out at alarming rates. While well-trained providers are vital to healthcare systems, the rapid changes from the pandemic have had dire effects on these individuals.

While front-line providers cared for COVID-19 patients, operations essentially halted for medical practices that were providing “nonessential” care. The COVID-19 crisis has had significant effects on medical practices of all sizes and specialties. A COVID-19 financial impact report by the Medical Group Management Association found that, on average, practices reported a 55% decrease in revenue and 60% decrease in patient volumes since the pandemic began. These decreases prompted decisions to furlough employees in an effort to avoid layoffs. In April 2020 alone, 1.4 million healthcare workers were furloughed. We have begun to see how COVID-19 is affecting medical practices’ financial viability.

This past spring, many medical practices re-opened to see patients in person. The increase of office visits amid lifting stay-at-home orders offered a glimmer of hope, but medical practices remain a long way from returning to normal. More than 60% of healthcare leaders reported their compensation has dropped during the pandemic, according to a June MGMA Stat poll. While the CARES Act will provide short-term relief, the implications will be felt for years. At a minimum, healthcare jobs and compensation will not return to anything close to normal until at least mid-to-late 2021. At best, we will see organizations hold off on annual pay increases for the next one to three years as they try to regain normalcy. At worst, we will see organizations decrease their workforces so they can decrease payroll, which is their largest operating expense.

Prior to the pandemic, compensation for physicians, providers other than physicians, nurses and other general and senior management positions was steadily increasing. According to Modern Healthcare, physician compensation was creeping upward in 2019. Most specialties saw 2% to 3% compensation gains, largely due to productivity. In 2020, some of the larger health systems started asking how to realign their compensation models now that those that were primarily volume-based have crashed.

Many healthcare employers that previously considered shifting away from fee-for-service to productivity-based models are actively planning to make that leap. With shifting demands on healthcare providers, the ongoing path to value-based care and the state of our healthcare industry overall, we can plan on compensation models looking different in a post COVID-19 world.

Where do we start the journey to align new compensation models? We start with what we know and build from there.

Healthcare organizations can use the compensation data from before the pandemic as a building block for the future. It is also crucial to understand that there is opportunity in a future that we design, including new compensation models that align us with our new challenges and goals. The only certainty is that COVID-19 is going to facilitate change in traditional healthcare provider compensation models now and into the future.

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